CBS and Viacom: The Long Road to Re-Merging the Redstone Empire

The wait is finally over. CBS and Viacom on Tuesday announced the long-awaited merger of the two media and entertainment companies, recombining the sister companies that parted ways in 2005, and creating ViacomCBS. It’s taken roughly three years to even get the two companies — both majority owned by Shari Redstone’s family holding company National Amusements — to agree to terms. The courting has been tumultuous, to say the least, with nasty legal disputes and a tug-of-war battle between Redstone and former CBS chief Les Moonves for power and control over the futures of both Viacom and CBS. Here’s an in-depth look back at how CBS, Viacom and the Redstone empire got to Tuesday’s merger — a day at least three years in the making: September 2016:  Fresh from wresting away control of Viacom earlier in the year, Shari Redstone and National Amusements proposed a plan for Viacom and sister company CBS to merge. “We believe that a combination of CBS and Viacom might offer substantial synergies that would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape,” Redstone wrote in a letter to National Amusements shareholders on Sept. 12. “As a result, we would like both companies’ boards to consider a potential combination of the companies.” Meanwhile, Viacom was in the midst of a game of CEO musical chairs; interim President and CEO Tom Dooley stepped down on Sept. 21, just weeks after taking over for the ousted Philippe Dauman. Things started trending in Redstone’s favor toward the end of the month, with both CBS and Viacom forming special committees to look at a potential merger. October 2016:  Viacom named longtime exec Bob Bakish as chief executive on Halloween. Bakish had been with Viacom since 1997, and was bumped up from head of its international media networks. The move wasn’t an immediate panacea for Viacom shareholders, though, with the company’s stock falling 9 percent in the two months to follow. November 2016:  CBS continued its exploration of a potential merger, retaining Goldman Sachs and Moelis & Co. to advise the network, according to the Wall Street Journal.

December 2016:  After push-back from CBS boss Les Moonves, and with Viacom in need of an overhaul, Redstone pumped the brakes and asks CBS and Viacom to stop pursuing a merger on December 12. Redstone pointed to Bakish’s “forward-looking thinking and strategic plan” to get Viacom back on track as a reason to hold off. Moonves got his kudos, too. “We know Viacom has tremendous assets that are currently undervalued, and we are confident that with this new strong management team, the value of these assets can be unleashed,” said Redstone in a National Amusements letter to shareholders. “At the same time, CBS continues to perform exceptionally well under Les Moonves, and we have every reason to believe that momentum will continue on a stand‐alone basis.” Concerns about consumer cord-cutting regained steam around the media industry and companies began considering mergers and partnerships to help protect against the impact. The Wall Street Journal reports July 25 that Bakish was making a play to acquire Scripps Networks. December 2017:  Emails made public through Sumner Redstone’s suit with two former female companions revealed insights into his strained relationship with daughter Shari. As The Journal reported, Shari Redstone feared her father would ensure her and her family “are all left with nothing and that his little sluts get it all with no interference from us.” Disney announced a blockbuster move to buy the bulk of Fox’s entertainment assets for $52.4 billion. January 2018:  New year; new merger? TheWrap reported Shari Redstone was once again pursuing a recombined CBS-Viacom, but this time Moonves appeared to be on board. “With the Hollywood landscape quickly shifting, Redstone, president of the privately-held National Amusements that controls both media companies, has concluded that a bigger footprint is necessary for the companies to thrive,” reported TheWrap. “CBS’ core business is broadcast television along with multiple digital properties, while Viacom holds cable channels like Nickelodeon and Comedy Central along with the Paramount movie studio.” Reports surfaced that Lionsgate was looking for a potential suitor in Amazon, Verizon and even a potentially recombined CBS-Viacom. February 2018:  All seems well with Redstone and Moonves, as they both sit in the CBS box at the Super Bowl in Minnesota on February 2. Both Moonves and Redstone were cheering for the Patriots. April 2018:  CBS extended an offer to buyout Viacom below its market value on April 3, with plans for Moonves and CBS Chief Operating Officer Joe Ianniello to run the new mega-company. Viacom countered the following week, with a $14.7 billion all-stock offer — worth nearly $3 billion more than CBS’ offer. Viacom also pushed for Bakish to supplant Ianniello as the combined company’s chief operating officer and Moonves’ successor. National Amusements shot down chatter that Shari Redstone was considering removing Moonves in favor of Bakish. “National Amusements has tremendous respect for Les Moonves and it has always been our intention that he run a combined company,” a rep told TheWrap. Redstone began reaching out to members of Viacom’s special committee, doubting the validity of a potential merger. May 2018: Redstone and Moonves met to discuss Bob Bakish’s role in a combined company and whether Charles Gifford should continue to serve on the company’s board of directors following an “intimidating” moment in which Redstone said he grabbed her by the face to get her attention. CBS announced on May 14 that it ws ending any pursuit of a merger with Viacom and filed a lawsuit against Redstone and National Amusements claiming NAI had shirked its responsibility to shareholders. CBS also filed for a temporary restraining order, voicing concerns Redstone might do more harm by replacing board members. CBS deployed an unprecedented and nuclear option, announcing a plan to issue dividends to dilute NAI’s nearly 80 percent controlling stake in the company to 17 percent. Two days later, Redstone and National Amusements change the CBS bylaws to prevent the board from diluting her stake, requiring a 90 percent “supermajority” vote for the board to make any dividend-related move. Hours after a Delaware court denied CBS a temporary restraining order on May 17, the CBS board voted, without the support of the three members aligned with Redstone, to dilute Redstone’s voting power — but the decision awaits court approval in light of NAI’s change to the bylaws. The following week, CBS amended its original complaint filed with the court, challenging Redstone’s bylaw changes. National Amusements fired back in a court filing on May 29, saying CBS had made an “unlawful” maneuver to dilute its voting rights. National Amusements added that Redstone “no longer supported” a merger before CBS moved to dilute her shares. July 2018:  In a bombshell report from The New Yorker’s Ronan Farrow,  six women accused Moonves of sexual harassment, with four of them accusing him of forcibly touching or kissing them during business meetings; the other two women said that he physically intimidated them or threatened to derail their careers. All of the women, including actress and writer Illeana Douglas, told Farrow that they feared retaliation if they spoke out. Thirty current and former CBS employees told Farrow “that such behavior extended from Moonves to important parts of the corporation, including CBS News and ’60 Minutes.’” In a statement at the time, Moonves said that his advances may have made the women “uncomfortable,” but they were “mistakes” and nothing more. “I  always understood and respected — and abided by the principle — that ‘no’ means ‘no,’ and I have never misused my position to harm or hinder anyone’s career.” Moonves remained in his post as chief executive while CBS launched an independent investigation into the accusations. September 2018: Moonves resigned from CBS — the company he had stewarded for the previous 15 years —  on Sept. 9, after six additional women accused him of sexual harassment and assault in a new report from The New Yorker. One of the accusers, veteran TV executive Phyllis Golden-Gottlieb, said Moonves forced her to perform oral sex and later threw her against a wall while working together years earlier. Golden-Gottlieb said she filed a criminal complaint with the Los Angeles Police Department in late 2017; authorities found her story to be credible, but they could not move forward with charges because the statute of limitations had expired, according to The New Yorker. “Untrue allegations from decades ago are now being made against me that are not consistent with who I am,” Moonves said in a statement announcing his exit. Moonves added he was “deeply saddened to be leaving the company. I wish nothing but the best for the organization, the newly comprised board of directors and all of its employees.” On the same night Moonves exited, the CBS board reached a settlement to end its nasty legal fight with National Amusements Inc. Under the terms of the settlement, the parties agreed to dismiss their pending litigation in Delaware. With Moonves — perhaps the chief roadblock towards a reunited CBS and Viacom — out of the way, the two companies are poised to revisit a merger. Also as part of the deal, Redstone’s National Amusements agreed not to make a proposal to push for a merger for at least two years, reaffirming that it will give good faith consideration to any business combination transaction or other strategic alternatives that the independent directors believe are in the best interests of the company and its stockholders.. Joe Ianniello, who had served as the company’s COO since 2013, took over as president and acting CEO.

December 2018:

The CBS board determined there are grounds to terminate Moonves’ contract for cause. Moonves had stood to receive a $120 million severance package.

The CBS board, in a statement announcing its decision, pointed to Moonves’ “willful and material misfeasance, violation of company policies and breach of his employment contract, as well as his willful failure to cooperate fully with the company’s investigation.” Beyond Moonves’ monetary fate, investigators determined that “harassment and retaliation are not pervasive at CBS,” but that the company’s historical policies didn’t make “preventing harassment and retaliation” a “high institutional priority.” April 2019: CBS extended Joe Ianniello’s tenure as president and acting CEO for an additional six months. Also, CBS’ Board of Directors determined it would suspend its search for another chief executive — fueling speculation another run at a CBS-Viacom merger could be in the works. May 2019:  Could the third time be the charm for CBS and Viacom? It looked that way after the CBS board prepared to once again begin merger talks with Viacom. Viacom was in a better position than it was the previous summer. Bakish continued to revamp the company and bolster its digital efforts, with Viacom buying free streaming service Pluto TV in January for $340 million. At the same time, Viacom’s business was turning around, with back-to-back quality financial reports under its belt. July 2019:  CBS and Viacom showed how serious they were about getting a merger done this time by setting an informal deadline — a business school staple — circled for Aug. 8. The companies agreed to keep a price tag out of the discussions until its management structure is settled. August 2019:  CBS and Viacom reached a “working” agreement on the management structure of a new CBS-Viacom. Under the framework, Viacom CEO Bob Bakish would take over as CEO of the combined company while Joe Ianniello, who has served as acting CEO for CBS since Les Moonves’ ouster last September, would be offered an unspecified senior role overseeing brand assets. A week later, the deal closed, at long last, on Aug. 13. The two companies agreed to an all-stock deal that valued Viacom at roughly $12 billion. CBS shareholders will own approximately 61% and Viacom shareholders will own approximately 39% of the new company, which is named ViacomCBS. In making the announcement, ViacomCBS touted an annual revenue of $28 billion. (By comparison, Disney reported more than $20 billion in sales during its most recent quarter.) Bakish, as expected, is named president and CEO of ViacomCBS, while Ianniello is named chairman and CEO of CBS, putting him in charge of all CBS-branded assets. The merger reunites the media giants and brings a hoard of assets under one roof: Paramount Pictures, a laundry list of cable channels that includes MTV and Comedy Central, Bellator MMA, Pluto TV, Showtime, Simon & Schuster publishing company, and the entire CBS lineup. It’s unclear at first how the newly-minted company will handle its streaming strategy, but a bundle package, a la Disney’s recent move, could be in the works. Combined, ViacomCBS will capture an estimated 22% of traditional TV viewers — placing it ahead of both Comcast and Disney. The deal is also the culmination to Shari Redstone’s long push to bring Viacom and CBS together once again. Moving forward, Redstone will serve as chairwoman of the board of ViacomCBS. Tim Baysinger and Tony Maglio contributed to this report.