WSJ says Mel will stay

After months of keeping the world guessing about his future, this morning's Wall Street Journal reports that Mel Karmazin is close to signing a deal to remain as President and COO of Viacom (N:VIA & VIAb) after his current contract expires the end of this year.

Viacom's board of directors met Wednesday - - behind closed doors, of course - - and reportedly discussed a deal for Karmazin to stay with the company. While the WSJ said terms of the deal weren't known, it would likely be a compromise between Karmazin, who wants to retain most of the powers he's had for nearly three years since agreeing to merge CBS with Viacom, and CEO Sumner Redstone, who wants to reclaim the absolute authority he had at Viacom prior to the merger.

RBR Observation:

Wall Street will certainly cheer if and when Karmazin signs a new deal to stay with Viacom. And while it had looked last year like there was little possibility of a compromise, Redstone has sounded in recent months like he was much more interested in keeping Mel - - apparently not liking the idea of having him as a competitor as rumors swirled that he could pop up at AOL time Warner (N:AOL) or Disney (N:DIS).

To hear Sumner talk in recent Wall Street conference calls, Mel is a great guy doing a great job. So it's really down to a battle of egos. Sumner doesn't really want to change anything that Mel is doing, but he wants to know that he could if he wanted to. So how much authority is he willing to give up to keep Mel? Maybe some, but not a lot, since the WSJ indicates that the remaining question is whether Mel will agree to what has been proposed.

Come May, the three-year provisions of the Viacom-CBS merger will expire and Redstone, with his majority voting power, will be able to replace at will any of the CBS designees on the Viacom board of directors. That's when things could get ugly, if the deal that's on the table now doesn't get signed.