CBS Corp. and Viacom have entered into a definitive agreement to combine in an all-stock merger, creating a combined company (ViacomCBS) with more than $28 billion in revenue.
The combined company, ViacomCBS, Inc., will be a global, multiplatform, premium content company, with the assets, capabilities and scale to be a leading global content producer and provider. The combined company will be a scale player globally, with leadership positions in markets across the U.S., Europe, Latin America, and Asia. This includes the largest television business in the U.S., with the highest share of broadcast and cable viewing across all key audience demographics, and strength in every key category (news, sports, general entertainment, pop culture, comedy, music and kids.
In addition, the combined company will possess a portfolio of fast-growing direct-to-consumer platforms, including subscription and ad-supported offerings. It will also include Paramount Pictures, which has been a producer and global distributor of filmed entertainment for more than a century. Taken together, these distinct strengths will accelerate CBS and Viacom’s ability to deliver an array of compelling content to important and diverse audiences across both traditional and emerging platforms around the world.
Bob Bakish, president and CEO, Viacom, will become president and CEO of the combined company.
“Today marks an important day for CBS and Viacom, as we unite our complementary assets and capabilities and become one of only a few companies with the breadth and depth of content and reach to shape the future of our industry,” he said. “Our unique ability to produce premium and popular content for global audiences at scale—for our own platforms and for our partners around the world—will enable us to maximize our business for today, while positioning us to lead for years to come. As we look to the future, I couldn’t be more excited about the opportunities ahead for the combined company and all of our stakeholders— including consumers, the creative community, commercial partners, employees and, of course, our shareholders.”
Joe Ianniello, president and acting CEO of CBS, will become chairman and CEO of CBS. Ianniello, who will oversee all CBS-branded assets in his new role, said, “This merger brings an exciting new set of opportunities to both companies. At CBS, we have outstanding momentum right now—creatively and operationally—and Viacom’s portfolio will help accelerate that progress. I look forward to all we will do together as we build on our ongoing success. And personally, I am pleased to remain focused on CBS’s top priority – continuing our transformation into a global, multiplatform, premium content company.”
“I am really excited to see these two great companies come together so that they can realize the incredible power of their combined assets,” said Shari Redstone, vice chair of the boards of directors, CBS and Viacom, said. “My father once said ‘content is king,’ and never has that been more true than today. Through CBS and Viacom’s shared passion for premium content and innovation, we will establish a world-class, multiplatform media organization that is well-positioned for growth in a rapidly transforming industry. Led by a talented leadership team that is excited by the future, ViacomCBS’s success will be underpinned by a commitment to strong values and a culture that empowers our exceptional people at all levels of the organization.”
The Game Plan
- Premium content at scale. The combined company will include a portfolio of consumer brands—CBS, Showtime, Nickelodeon, MTV, BET, Comedy Central and Paramount Network—as well as a robust library of well-known IPs, spanning key genres and addressing consumers of all ages and demographics. This library comprises 140,000-plus TV episodes and 3,600-plus film titles, including such fan-favorites as Star Trek and Mission: Impossible. The combined company will also have more than 750 series currently ordered to or in production. In addition, there’s Paramount Pictures. The combined company will also be one of the largest content spenders, with more than $13 billion spent in the last 12 months.
- Global leadership positions. The combined company will reach more than 4.3 billion cumulative TV subscribers around the world. In addition to its dominant share of TV viewing among key audiences (kids, African Americans, and Hispanic viewers) in the U.S., the combined company will operate strong broadcast networks in the UK, Argentina, and Australia as well as pay-TV networks across more than 180 countries. It will have significant global production capabilities across five continents – creating content in 45 languages.
- Powerful, three-part strategy for growth. In a quickly evolving media landscape, the combined company will benefit from its competitive position as a global content provider for its own platforms as well as for third parties. This will enable the combined company to accelerate the growth of its direct-to-consumer strategy, enhance distribution and advertising opportunities and create a leading producer and licensor of premium content to third-party platforms globally.
- Accelerate direct-to-consumer strategy. Together, the combined company will be positioned to accelerate and expand its direct-to-consumer strategy through its portfolio of both subscription and ad-supported offerings. These include CBS All Access and Showtime, which deliver premium, branded content live and on demand to millions of subscribers; Pluto TV, the free streaming TV service in the U.S.; and niche products such as CBSN, ET Live, and Noggin. It also has an opportunity to expand globally by leveraging its subscription and ad-supported offerings, combined library, content production capabilities, and international infrastructure.
- Enhance distribution and advertising opportunities. The breadth and depth of the combined company’s reach across both traditional and new platforms—including 22 percent of U.S. TV viewership—will drive new distribution and advertising opportunities. For distributors, this includes forming more expansive and multifaceted relationships, and applying the benefit of retransmission consent across a combined portfolio. For advertisers and agencies, the combined company will provide industry-leading reach through a variety of formats, including a portfolio of differentiated advanced advertising and marketing solutions, such as CBS Interactive, Viacom Vantage and Viacom Velocity, which will be applied against significant expanded inventory across the portfolio.
- Create a leading producer and licensor of premium content to third-party platforms globally. The combined company is positioned to deliver content to a diverse global customer base that includes MVPDs, broadcast and cable networks, subscription and ad-supported streaming services, mobile providers, and social platforms. In addition to content licensing, CBS and Viacom are developing programming for a broad range of third-party networks and platforms to feed demand for original, premium content.
- Significant value for all shareholders. The combined company will have a growth outlook and an increased financial scale with substantial free cash flow, which will enable significant and sustained investment in programming and innovation, as well as support the combined company’s commitment to maintaining a modest dividend payment. The transaction will be EPS accretive and is expected to deliver an estimated $500 million in annualized run-rate synergies within 12-24 months following closing, with additional strategic benefits. With one of the strongest balance sheets in the industry, the combined company will benefit from a solid investment grade rating.
Leadership, Governance and Transaction Terms
In addition to Bakish and Ianniello, the leadership team of the combined company will include Christina Spade as executive vice-president and CFO; and Christa D’Alimonte as executive vice-president, general counsel, and secretary.
The BoD will consist of 13 members: six independent members from CBS, four independent members from Viacom, the president and CEO of ViacomCBS, and two National Amusements, Inc. (NAI) designees. Redstone will serve as chair.
The merger agreement was approved by the boards of both CBS and Viacom by unanimous vote of those present, upon the unanimous recommendations of the Special Committees of the CBS and Viacom Boards of Directors, respectively. Existing CBS shareholders will own approximately 61 percent of the combined company and existing Viacom shareholders will own approximately 39 percent of the combined company on a fully diluted basis. Under the terms of the merger agreement, each Viacom Class A voting share and Viacom Class B non-voting share will convert into 0.59625 of a Class A voting share and Class B non-voting share of CBS, respectively.
NAI, which holds approximately 78.9 percent and 79.8 percent of the Class A voting shares of CBS and Viacom, respectively, has agreed to deliver consents sufficient to assure approval of the transaction. More than two-thirds of the CBS directors unaffiliated with NAI (and all of those unaffiliated directors who voted on the transaction) have approved the transaction, as required in order to permit NAI to consent to the transaction under the terms of the 2018 settlement agreement entered into among CBS, NAI and certain other parties thereto.
The transaction is subject to regulatory approvals and other customary closing conditions. It is expected to close by the 2019 calendar year end.
The Special Committee of CBS’s Board of Directors is being advised by Centerview Partners LLC and Lazard Frères & Co. LLC as its financial advisors and by Paul, Weiss, Rifkind, Wharton & Garrison LLP as its legal counsel. The Special Committee of Viacom’s Board of Directors is being advised by LionTree Advisors LLC and Morgan Stanley & Co. LLC as its financial advisors and by Cravath, Swaine & Moore LLP as its legal counsel. Viacom is being advised by Shearman & Sterling LLP. NAI is being advised by Evercore as its financial advisor and by Cleary Gottlieb Steen & Hamilton LLP as its legal counsel.