Thirteen Years Of Separation End For CBS, Viacom

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RBR+TVBR INFOCUS


On New Year’s Day 2006, a separation of two media companies that had once been separate in the past became official. CBS Corporation, a subsidiary of Viacom, had completed its spinoff — a move designed to put its “slower-growth” broadcasting and publishing operations into one company while its “faster-growing” movie and advertising-supported cable units went into another company.

What a difference 13 1/2 years makes. With Viacom-owned Paramount Pictures having experienced huge losses in 2016 and cord-cutting one of the biggest problems facing the cable TV industry, the idea of two separate companies doesn’t make much sense anymore for No. 1 shareholder National Amusements Inc., led by Shari Redstone.

As such, the most anti-climatic announcement in years finally arrived from CBS Tuesday afternoon — it is reunifying with Viacom. But, the initial separation in January 2006 is worth a look today.

Back then, Viacom was structured to become the parent company of Paramount, in addition to MTV Networks. With Spongebob Squarepants a gold mine for Nickelodeon, and Comedy Central and CMT big draws, Tom Freston had oversight of a company that was reveling in its cable success while enjoying millions of dollars in box office revenue from such releases as The Longest Yard and War of the Worlds.

CBS, led by Les Moonves, would comprise the broadcast TV networks and O&Os, CBS Radio Network and the CBS Radio stations, Viacom Outdoor, Showtime, King World, Simon & Schuster and Paramount Parks.

Today, MTV Networks is in rebuild mode, with MTV Tr3s long-shuddered in the U.S. and Nickelodeon still counting on Mr. Squarepants to deliver big ratings and revenue for Nickelodeon. In 2016, MoffettNathanson analyst Michael Nathanson implored then-interim Chairman/CEO Tom Dooley to sell Paramount to the highest bidder.

“While new management might look to fix all that is wrong at Viacom, we find it hard to believe that anything will be solved until the CBS-Viacom pieces are put back together again,” Nathanson said.

And, that’s exactly what happened. Paramount was not sold, and CBS and Viacom are now reunited.

As reported by Radio & Records on Jan. 6, 2006, the transaction was announced in June 2005 to address concerns that investors were shying away from Viacom stock due to the company’s diverse asset base.

Today, with the merger announcement, Viacom’s Class B shares finished at $29.21, rising 2.4% from Monday, on high volume of 11.5 million shares. Average volume is 3.78 million shares.

Viacom shares have been somewhat stable over the last 12 months, with October 2018 seeing two instances where shares surpassed $33 in value. The lowest point came March 18, 2019, when VIA-B dipped to $25.34.

For CBS investors, the $11.7 billion merger yielded no significant uptick for CBS shares, which finished Tuesday’s trading at $48.71.

Like Viacom, CBS’s best 12-month pricing came in October 2018, with multiple closing above $57 per share. In late December, they dipped as low as $43.36.

Now, with ViacomCBS Inc. set to emerge, it remains to be seen just where shareholders will stand 12 months from today.

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