(Bloomberg) -- CBS Corp. will take its first official step toward exploring a combination with Viacom Inc. when its board discusses a potential deal on Thursday, according to people familiar with the matter.
The board is likely to use a regularly scheduled meeting to talk about forming a committee to explore a deal, said the people, who asked not to be identified discussing private matters. The board may also bring up formally appointing financial advisers to work on a transaction, a move that both companies are expected to make in the next couple of weeks, one of the people said.
CBS and Viacom, which split into separately traded companies in 2006, established similar committees to explore a recombination in September 2016 at the behest of Shari Redstone, the daughter of controlling shareholder Sumner Redstone. The deal was abandoned later that year, but Shari Redstone has recently been pushing to reconsider the move as major competitors such as Walt Disney Co. and Time Warner Inc. get bigger through multibillion-dollar deals.
Thursday’s gathering will be the first time the CBS board has met since the renewal of conversations about a potential merger with Viacom, which the Redstones also control. Shari Redstone has held preliminary conversations about a deal with CBS Chief Executive Officer and Chairman Leslie Moonves, as well as with Viacom boss Bob Bakish.
A representative for CBS declined to comment.
While Moonves has also met with companies including Verizon and Lions Gate about potential deals, people familiar with the matter have said, he’s hamstrung by the Redstone family’s controlling stake. The Redstones’ holding company, National Amusements Inc., holds 80 percent of the voting stock of Viacom and CBS.
CBS has a market value of about $23 billion, while Viacom is valued at $13.7 billion. Viacom rose as much as 1 percent in early New York trading, and CBS was unchanged.
Moonves and Bakish have also met in recent weeks to establish an open line of communication as their two companies consider returning to the table. Although the two have known each other for more than a decade, most details will have to be worked out at the board level.
CBS’s board was scheduled to meet before talks about a merger picked up steam, and the potential deal isn’t on the official agenda. Still, the potential combination of two multibillion-dollar media companies looms over both the meeting and upcoming earnings reports. Viacom will report on Feb. 8, with CBS results due Feb. 15.
Convincing the CBS board that a deal is worth pursuing will be the tougher sell. The company has weathered a turbulent period for the pay-TV business better than most, and has created a couple of streaming services to reach viewers who no longer pay for cable. CBS still possesses broadcast rights to football, the most-watched programming on TV, and has churned out new hits almost every year. Yet the company looks increasingly small as rivals merge and online giants dabble in entertainment.
Moonves and Redstone struggled to overcome several hurdles the last time the boards explored a deal, and it’s still not clear that CBS and Viacom will be able to resolve disagreements over matters including valuation and control of the companies. While the Redstone family has always been very involved in the companies they control, Moonves has operated CBS with a great deal of autonomy over the past several years.
Bakish has instituted a plan to rebuild the programming pipeline at Viacom after years of neglect, and the company just reported its first year of sales growth since 2011. There’s still a long way to go. Networks MTV, BET and Comedy Central have surrendered young viewers to online outlets YouTube and Netflix.
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