Redstone weighs CBS-Viacom merger with or without
Moonves
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[April 11, 2018]
By Jessica Toonkel
NEW YORK (Reuters) - As she seeks to
combine CBS Corp <CBS.N> and Viacom Inc <VIAB.O> into a single company,
media mogul Shari Redstone risks losing her most talented executive,
whose leadership could be critical to ensuring the proposed merger
succeeds.
Such is the difficulty facing Redstone. Her long-time friend and
business ally, powerful CBS chief executive Les Moonves, has emerged as
one of the biggest obstacles to a potential CBS-Viacom tie-up, according
to people familiar with the matter. Concerns are that his objections
could either doom the transaction or that he might not lead the new
entity, the people said.
Moonves is chafing at Redstone's insistence on installing Viacom's CEO
as his second-in-command and likely successor of a merged company, the
people say. CBS and Viacom announced in February that they were
exploring a potential deal and in recent weeks have begun negotiations.

At stake is the future of Redstone's media empire, which is facing
pressure to scale up at a time when competitors are gobbling rivals to
stay relevant. Her family's company, National Amusements Inc, controls
both CBS and Viacom. Redstone favors merging the two to gain size and
leverage in negotiating better programming prices from traditional cable
and satellite customers, and to better compete with emerging players
such as Netflix, the people said.
But she may have to decide if she is willing to do it without her top
captain to steer the ship.
Redstone wants Moonves to run the combined company, according to the
people familiar with the situation, all of whom wished to remain
anonymous because discussions are confidential. But she is contemplating
moving forward without him at the helm if no agreement can be reached to
keep him aboard, said one of the people close to the situation.
With over 25 years at CBS and more than a decade as CEO, Moonves has
proven adept at navigating a difficult media landscape. Under his
leadership, CBS has been a top performer in its sector with some of the
most popular shows on television. CBS stock is up over 116 percent on
his watch. At 68, Moonves is an industry legend and still at the top of
his game.
Still, Redstone is concerned about succession planning, the people said.
She wants 54-year-old Bob Bakish, whom she chose two years ago to lead a
turnaround at Viacom, to be president and chief operating officer of the
combined company; Bakish would report to Moonves, with the expectation
of succeeding him, the people said.
"Shari values Les, but we are now in a world of: 'what happens after
Les?'" said one of the people close to the situation.
Redstone, Moonves and Bakish declined to comment through spokespeople.
Viacom and CBS declined to comment.
Moonves, meanwhile, wants his long-time lieutenant, CBS chief operating
officer Joseph Ianniello, to take the No. 2 spot at the combined
company, according to people familiar with his thinking.

The men have forged a successful working relationship that could prove
key to melding two very different entities. Moonves and Viacom's Bakish,
in contrast, have met just a handful of times, according to people
familiar with the situation.
"Les is saying 'I want to make this successful. ..but let me have my
team,'" one of the people said.
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Shari Redstone arrives for Variety's Power of Women luncheon in New
York City, U.S., April 21, 2017. REUTERS/Brendan McDermid

OLD HAND, NEW BLOOD
Despite recent tensions, Redstone has long been close to Moonves, who
was selected by her father, Sumner Redstone, to be CEO of CBS when it
was spun off from Viacom in 2006.
She and Moonves have gone to football games and movie premiers together.
And she has said that Moonves was one of her staunchest supporters amid
highly public legal battles, including a feud with Viacom's former CEO,
Philippe Dauman, and clashes with former girlfriends of her elderly
father seeking a share of his riches.
"I have a great relationship with Les," 63-year old, Redstone told a
Recode conference last year.
Redstone has also taken a shine to Bakish since plucking him from
Viacom's international division in 2016 and installing him as the firm's
chief executive. As CEO, Bakish engineered a turnaround plan for the
company's struggling movie studio and TV networks and boosted badly
sagging staff morale, keeping Redstone in the loop through it all,
people familiar with the situation said.
That is a big change considering Redstone for years was unwelcome at
Viacom under former CEO Dauman, the people said. A bid by the Redstones
to reassert control culminated in Dauman's departure in 2016.

The media heiress is now a familiar face in the hallways of Viacom's New
York offices. She has attended employee town halls and company events,
including the relaunch of the MTV show "Total Request Live."
Bakish and Redstone talk at least weekly, and he includes her in all
major decisions, according to people familiar with the situation.
"He brought her in and solicits her thoughts, and in some ways that was
the way to her heart," said one person close to Redstone and Viacom.
NOT A DONE DEAL
There are other issues that could scuttle the merger.
The special board committees that CBS and Viacom have formed to
negotiate a deal currently disagree about how many CBS shares Viacom
shareholders should receive.
CBS has offered 0.55 of its shares for every Viacom Class B share,
according to the sources. Viacom countered last week that it wanted 0.68
CBS shares for every Viacom Class B share, the sources said.
What is clear is that Moonves is seen as a major asset to the combined
company. Many analysts expect CBS' stock to take a hit if he is not part
of any new leadership team.
If the current standoff continues, Redstone may have to decide if losing
Moonves is worth going to the mat for Bakish, the up-and-comer.
"They are both stars," Redstone said of CBS and Viacom at the Recode
conference last year. "And I love them both."
(Reporting by Jessica Toonkel in New York; Editing by Greg Roumeliotis
and Marla Dickerson)
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