Shari Redstone’s ViacomCBS mega-merger a mess
A few years ago, it seemed that Shari Redstone hit the jackpot: Not only did she finally get rid of her chief tormentor in Les Moonves, she also pushed through a long-sought formal merger of the two companies she controlled, CBS and Viacom.
The merger was a career moment for Shari: The former corporate lawyer and daughter of famous media mogul Sumner Redstone created what was considered a programming empire of news, entertainment and sports. Wall Street cheered Shari as the Queen of All Media.
The cheering has now stopped. The Queen’s empire is faltering.
If you want to know what’s wrong with ViacomCBS, first take a gander at its stock price. Despite a pandemic that forced people to watch more TV, the valuation has barely moved in the past two years except for a brief spell when it was manipulated higher in the Archegos-Bill Hwang debacle.
What’s less obviously wrong with ViacomCBS is what’s going on behind the scenes, media execs and bankers tell me. Redstone needs to sell her baby because what looked big then isn’t so big any longer. Its scale of programming, while diverse (“60 Minutes,” NFL games, etc.), just isn’t enough to compete against programming giants like Comcast, Disney, Netflix and Amazon.
And it’s not going to be easy to find a buyer, bankers and media executives concede.
Redstone presumably knows all of this because she has LionTree’s high profile, media-savvy media banker Aryeh Bourkoff on speed dial. Or she knows this because she learned something from her late father.
With such expertise to fall back on, Shari certainly should know something else: She only has herself to blame.
This was not how the script was supposed to read back in 2018. Recall, Moonves, then the CBS chief, ran the network as his own fiefdom despite nominally reporting to the Redstones. First Sumner, who died in 2020, then Shari when she took control of the family business, the holding company National Amusements, which had controlling stakes in Viacom and CBS.
Wall Street lionized Moonves’ programming skills and ability to deliver earnings. But Shari had her own vision for the business, and her advisers believed she needed a Viacom-CBS mashup to survive in a business that demanded scale to compete.
Moonves wanted nothing to do with Shari or Viacom’s “Jersey Shore” programming, so he staged a palace coup, attempting to wrest control of the company from Redstone through lawsuits based on shaky legal theories. The law clearly wasn’t on his side. Plus, Moonves had baggage, including a mountain of sexual-harassment claims that ultimately was his downfall.
Shari got her merger. But in retrospect, Moonves was probably right that CBS was more valuable as a stand-alone company.
The logic goes something like this: CBS could maintain a separate brand status of high-end news shows like “60 Minutes,” sports and top-rated TV shows. Even better, it could also be more easily digested by a tech giant, a private equity firm, or any number of suitors. The same thing could have been said (albeit to a lesser degree) about a stand-alone Viacom.
Consider that at the close of trading Friday, ViacomCBS had a market value of $26 billion, less than the $33 billion market cap of the two stand-alone companies pre-merger: At that time, CBS had a market value of $20 billion and Viacom, $13 billion.
Meanwhile, the ViacomCBS mashup could be a tough one to sell. Tech is largely out of the bidding because the Biden administration doesn’t want it to get bigger. A deal with Comcast would be messy since it owns NBC and either that or CBS wouldn’t survive the antitrust cops. Disney, which owns ABC, faces the same problem.
AT&T is getting out of content, having just spun out WarnerMedia (HBO, Fintech Zoom etc.) into a separate company with Discovery (Food Network, HGTV) run by veteran media executive David Zaslav.
Private equity has been snapping up content, but they don’t want to overpay. Given ViacomCBS’s size, a deal approaching
$30 billion would require two PE firms to make it work.
The voluble Bourkoff is known to be resourceful so I’m sure he’s looking at all the alternatives to pad his dealmaking résumé.
That would likely include this advice for Shari: Enjoy life without Moonves, while building out your streaming service and maybe buy something that could make ViacomCBS more attractive down the road, possibly AMC Networks, the $2 billion channel that produced the likes of “Mad Men” and “Breaking Bad.”
AMC (not to be confused with the money-losing meme-stock theater chain) is undergoing management change and likely looking for a buyer, they say. Shari is sitting on $5 billion in cash, and Bourkoff can smell a banking fee from a mile away.