CBS Clears a Subplot for Its Reunion With Viacom

(Bloomberg Opinion) -- CBS Corp. looks ready to make a deal. 

The broadcaster said on Tuesday that it was no longer looking for a permanent successor to Leslie Moonves, its disgraced former CEO who left in September in the wake of numerous sexual-harassment allegations. Instead, Joe Ianniello, who had been Moonves’s No. 2, has agreed to stay on as acting CEO through the end of the year. They might not even need his services that long.

The turn of events sends a strong signal that CBS is prepared to merge with Viacom Inc., which is how I suspected this would play out. It never made much sense that CBS would search for a new leader while also potentially trying to negotiate a deal with Viacom. The former process certainly complicates the latter — and vice versa. Plus, Viacom is led by the very capable Bob Bakish, who just so happens to be held in high regard by Shari Redstone, who effectively controls both companies. 

Redstone has long wanted CBS and Viacom to recombine. As part of a settlement with CBS last year, she agreed not to propose a deal for at least two years, but the prevailing thought is that the board’s independent directors will come to their own conclusion that a merger with Viacom is the best path forward. Together, the companies, which are both grappling with how to retain viewers in the age of streaming, could save a lot of money in overhead costs to help bolster profitability. There are also benefits to sharing content and streaming capabilities: CBS has been building an audience for its CBS All Access and Showtime apps, and Viacom recently bought the free Pluto TV platform. But most important, together they’d have more scale, which not only helps them get by in a land of giants — Walt Disney Co., AT&T Inc., Apple Inc., Amazon.com Inc. — it also may make them a more palatable takeover candidate.

Ianniello needed to earn his way back into Redstone’s good graces after text messages uncovered last year revealed that he was backing Moonves in the bitter fight against her and his efforts to abolish her voting power. Ianniello has been doing a commendable job running CBS the last few months, though he lacks the presence of his counterparts at other companies, and it never seemed likely that he would be chosen to fill the role permanently. It’s notable that CBS chose to keep “acting” in his title.

The likely endgame for CBS and Viacom is to take advantage of the industry demand for content libraries and skilled studios by selling to a larger player. For that to happen, though, they need to finally strike a deal. But this time, spare investors the drama.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering deals, Berkshire Hathaway Inc., media and telecommunications. She previously wrote an M&A column for Bloomberg News.

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