Analyst: Reunification Great For CBS Shareholders


According to a trio of analysts at Credit Suisse, it’s great to be a CBS Inc. shareholder.

That’s because a recombination of CBS with Viacom “could be highly attractive” for them over time, they believe.

At current market prices and an assumed 1-for-1 share swap for “a combined “Viacom-CBS” with the same dual-class share structure, CBS shareholders would be sitting pretty with a 50% economic interest in the combined voting shares, a 63% economic interest in the combined non-voting shares, and a 61% of the total share capital.

Based on their numbers crunching, Credit Suisse research analysts Omar Shiekh, Lawrence Dann-Fenwick, and Boyao Sun conclude that the ownership stakes for CBS from a reunification with Viacom “are close to an all-time high” for the non-voting B shares.

These are the shares that most everyday investors hold.

CBS B shares have been on a roll since Sept. 20, when they bottomed out at just under $50. As of 3:06 p.m. Eastern on Oct. 5, CBS B stock was at $56.28 — a height not seen since mid-July.

“On these terms, we argue CBS B shareholders … will capture substantially more of the economic benefits of the near- and long-term synergies from combining the two companies than would have been the case historically, suggesting a recombination of the two companies could be highly attractive for CBS B shareholders over time.”

The assessment of a potential Viacom-CBS Inc. merger was conducted by the three Credit Suisse analysts in response to the Sept. 29 acknowledgment by CBS’s board of directors that it had received a letter from controlling shareholder National Amusements seeking their consideration — and that of Viacom’s board — of a potential recombination of the two companies.

As reported by RBR + TVBR,  Viacom’s board of directors on Sept. 30 confirmed that it has formed a special committee of independent directors to evaluate the request.

In the eyes of the Credit Suisse trio of analysts, a CBS-Viacom reunification would not only yield substantial near-term cost savings but also may be the No. 1 catalyst for turning around highly troubled Paramount Pictures. The merger would also put in place “a much-needed restructuring of Viacom’s cable network portfolio,” the analysts opine.

Credit Suisse reiterated its “Outperform” ratings for both CBS and Viacom-B, which has also seen an upswing in its shares in recent days. After sliding to $39.10 on Sept. 6, VIA-B shares were at $42.86 as of 3:27 p.m. Eastern on Oct. 5.