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If CBS and Viacom reunite, more mergers could be on the way

Shari Redstone has held conversations about quickly pursuing acquisitions that would help the company compete with other sizable media operations.
Image: Allen & Co. Holds Its Annual Sun Valley Conference In Idaho
President of National Amusements and vice-chairwoman of CBS Corporation and Viacom Shari Redstone arrives at the annual Allen and Company Sun Valley Conference, July 9, 2019 in Sun Valley, Idaho.Drew Angerer / Getty Images file

Shari Redstone has long sought to combine CBS and Viacom. If she has her way, that could be just the start.

Redstone, who is president of National Amusements, the controlling shareholder of CBS and Viacom, has held conversations about quickly pursuing acquisitions that would help the company compete with other sizable media operations, according to three parties familiar with the talks who were not authorized to speak publicly.

Redstone has floated two different companies for possible deals: movie and television studio Sony Pictures Entertainment and nonfiction TV company Discovery Communications.

“The CBS-Viacom merger is, to her, a starting line, not a finish line,” one of the people familiar with the situation said.

A combined CBS and Viacom would still be small compared to media titans such as Disney and WarnerMedia, and Redstone is eager for the new entity to compete with much larger players. The market value of CBS is about $19.7 billion and Viacom’s is close to $12.7 billion, while Netflix has a market value of around $142.7 billion.

One source said Redstone would be sure to have the backing of the board of the combined company. In January, CNBC reported on the possibility of Sony and Discovery as potential targets. Neither deal is imminent however.

Redstone has teased her ambitions to continue building beyond a CBS and Viacom. She assumed control of National Amusements from her ailing 96-year-old father, Sumner Redstone, who built the company from a chain of movie theatres into one of the most successful media conglomerates of the 20th century.

“I’ve always said, I think if these companies come together, we would probably want to look at something after that and to develop scale and be transformative as we move forward,” Redstone said in June at a conference hosted by digital media startup The Information.

A spokeswoman for National Amusements declined comment.

A combined CBS and Viacom would give the new entity negotiating power with distributors that are also bulking up and acquiring content businesses. CBS is currently in a dispute with AT&T’s DirecTV satellite service over carriage fees and is blacked out in some markets.

“Shari understands very clearly that there’s a different aspect to the scale and the game now,” the person familiar with the situation said. “Think about those two candidates: it’s unclear if Sony is for sale but they are two very different concepts.”

The assets Redstone is considering would provide Viacom and CBS with more titles that it can use on its own services or license to others, as well as an international footprint. Sony has a movie studio and a global network of entertainment channels, while Discovery owns U.S. cable channels including Food Network and HGTV, and has a growing global sports presence via Eurosport.

Acquiring Discovery, however, would mean Redstone was doubling down on cable television at a time that consumers are continuing to ditch pricey cable packages.

“She thinks she can build a bigger company with it,” this person said. “But do they need more channels?”

Viacom already owns several cable channels including MTV, Nickelodeon, Comedy Central and VH1, and it recently acquired streaming service PlutoTV.

Redstone attended the Sun Valley retreat hosted by investment bank Allen & Co. in July and has floated her intentions informally to the heads of both companies, according to the three people with knowledge of the discussions.

Sony Pictures Entertainment, which just released the movie “Once Upon a Time in Hollywood,” has received many expressions of interest over the years and has repeatedly said it is not for sale. A spokesman for Sony declined to comment.

Discovery Communications declined comment. The company said earlier this year that it isn’t for sale. Many acquisition conversations are thwarted simply because neither party wants to give up control.

Separately, CBS has been in talks with Lions Gate about a purchase of its Starz pay-TV service. CBS owns rival Showtime. It is unclear where these talks stand until the CBS/Viacom merger is complete. Lions Gate declined to comment.

The boards of the two companies are currently hammering out details of the offer price and management structure ahead of a possible Aug. 8 deadline, when CBS reports its second quarter earnings, according to CNBC.

CORRECTION (July 30, 2019, 7:06 p.m. ET): An earlier version of this article misstated Shari Redstone's title at National Amusements. She is the president, not the vice chair.