A letter from National Amusements Inc. to the boards of Viacom Inc. and CBS Corp. late last month urging a merger has sparked a new debate over the merits of rejoining the entertainment giants. Sumner Redstone, National Amusements’ chairman and chief executive, and his daughter, Shari, its president, control about 80 percent of the shares in each company. The pair recommended in the letter that Viacom and CBS negotiate an all-stock transaction. If such a deal were to happen, what would it mean for the L.A.-based crown jewels on both sides: Paramount Pictures and CBS Television?

Companies’ Star-Crossed Show Business Relationship

Viacom Inc. and CBS Corp. have a long, intertwining history. Established as CBS’ syndication arm, Viacom was spun off in 1971 as a public company after the Federal Communications Commission barred television networks from owning syndication companies – a rule that was eventually reversed in 1993.

Viacom grew by acquiring television stations and cable programming services, becoming a wholly owned subsidiary of Sumner Redstone’s National Amusements Inc. in 1987.

Viacom acquired Paramount Communications Inc. and Blockbuster Entertainment Corp. in 1994, making it one of the largest entertainment companies in the world. The company completed its biggest acquisition in 2004 when it bought former parent CBS for $39.8 billion. But the companies split the next year amid a stagnating stock price and internal tensions between Leslie Moonves, CBS’ chief executive, and then-Viacom chief Tom Freston. The resulting CBS, headed by Moonves, retained most of the prior firm’s broadcast TV assets, including its various syndication companies. Freston took the reins of the relaunched Viacom before being replaced in September 2006 by Philippe Dauman. National Amusements retained a controlling interest in both companies after the 2005 spinoff.

– Omar Shamout

3 ways a Viacom-CBS merger would impact Paramount Picturesways a Viacom-CBS merger would impact Paramount Pictures

1. The Moonves effect.

CBS has been thriving under the leadership of Chairman and Chief Executive Leslie Moonves – whom the elder Redstone has called a super genius. With struggling Paramount parent Viacom set to lose interim Chief Executive Tom Dooley next month, and the film studio suffering from a series of box-office busts, including a recent $115 million write-off on a movie that hasn’t been released, Moonves could provide the leadership needed to right Paramount’s ship. CBS TV has been the most-watched network 13 of the past 14 years, and analysts at New York-based investment firm Gabelli & Co. estimate the network will generate $14.6 billion in revenue this year, an increase of 5.1 percent from $13.9 billion in 2015. Per-share earnings are projected to hit $4.05. “Moonves is so incredibly savvy,” said Mary Murphy, a senior lecturer at USC’s Annenberg School of Journalism. “He knows his audience and programs for it.”

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