Rumors are spreading that Viacom Inc. (VIAB) and CBS Corporation (CBS), which started operating as separate entities from 2006, will be back again under one umbrella. The rumors of a possible reunion have surfaced as media mogul Sumner Redstone’s failing health has led to speculations of his stepping aside.
We note that 91-year old Redstone is the controlling shareholder of both entertainment companies through National Amusement Inc. According to reports, CBS Corp.’s CEO Leslie Moonves is discussing ways to buy out Redstone’s interest in the company. Moonves may believe the buyout of National Amusement is necessary if the merger of CBS Corp. with Viacom is thrust upon him in the event of Redstone passing away.
Moonves is of the opinion that the reunion, if it occurs, would be more favorable to Viacom’s CEO Philippe Dauman. According to a Bloomberg report, the merger would benefit Viacom’s shareholders to a great extent due to the valuation gap between the two companies.
CBS does trade at a premium to Viacom’. Given this, it might be interested in merging. But focus will be on whether CBS’ shareholders, already getting superlative returns, agree to the reunion. We believe investors will hereafter remain glued on updates regarding the possible merger in the media space.
Zacks Rank
While CBS Corp. carries a Zacks Rank #3 (Hold), Viacom has a Zacks Rank #4 (Sell). Better-ranked stocks include Electronic Arts (EA) and The Walt Disney Company (DIS). Electronic Arts (EA) sports a Zacks Rank #1 (Strong Buy), while The Walt Disney Company holds a Zacks Rank #2 (Buy).
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