An industry expert predicts CBS and Viacom will merge in 2019

Les Moonves resigned from
CBS on Sunday.

Drew
Angerer/Getty Images

• Les Moonves, chairman and CEO of CBS Corp,
  resigned Sunday amid sexual misconduct allegations.
• CBS also announced it reached a settlement with controlling
  shareholder National Amusements Inc.
• That announcement opens the door to a potential
  CBS-Viacom merger in 2019, according to industry analyst Rich
  Greenfield.

Les Moonves, chairman and CEO of CBS, resigned
Sunday amid allegations he sexually
harassed, assaulted, and retaliated against women who
rebuffed his advances over the course of his career at the
company.

Moonves has denied the allegations. “Untrue allegation from
decades ago are now being made against me that are not consistent
with who I am,” he wrote in a statement Sunday.

Moonves’ resignation ran concurrent with the announcement by CBS
that the company had reached a settlement with controlling
shareholder National Amusements Inc., putting an end
to litigation between the two companies. The
settlement opens the door to a CBS-Viacom merger in the coming
year, according to some industry experts.

We “strongly believe a merger between Viacom and CBS will
take place in 2019,” Rich Greenfield, media and technology
analyst at BTIG, wrote in a research
note.

CBS and NAI had been locked in a months-long battle over the
issue of whether to put CBS and Viacom together. Once part of the
same company, CBS and Viacom (MTV, Nickelodeon, etc.) formally
split in 2006.

Shari Redstone, vice chair of CBS Corporation
and Viacom and president of National Amusements,
had pushed for a remarriage, while CBS and Moonves
fought against such a move. The settlement Sunday came with the
stipulation that NAI could not propose a merger between the two
media companies.

But importantly, according to Greenfield, that leaves open the
possibility that independent board members from either company
could suggest such a transaction.

CBS has a new board which may be more open to a big move

The CBS board had a big reshuffle Sunday night when six new
members were appointed. Candace Beinecke, Barbara
Byrne, Brian Goldner, Richard D. Parsons, Susan Schuman and
Strauss Zelnick, have all joined the board as independent
members.

The appointments mean that a majority of the
independent
 board members were tapped by NAI,
similar to the board-member composition at Viacom, according to
BTIG, which noted the board’s makeup as another reason for the
likelihood of a CBS-Viacom merger.

From a strategic perspective, Viacom is one of the few
potential buyers for CBS, according to
BTIG. 
AT&T recently completed a media
merger acquiring Time Warner (now WarnerMedia), and Verizon has
made it clear it’s
future is with 5G and network improvements, not media deals.
Other legacy media companies — including Comcast, NBC, and ABC —
would have regulatory hurdles related to an acquisition.

“We simply do not
 see a buyer
for CBS beyond Viacom, which is why it would make sense for CBS
to proactively propose a Viacom transaction sooner than later as
scale is becoming increasingly critical in the media industry,”
Greenfield wrote in the note.