The tie-up, announced yesterday, is the latest stage in a massive consolidation of the US television, cable and media sectors. The consolidation has been driven by the convergence of new technologies, regulatory shifts in Washington and the booming US stock market.
Sumner Redstone, 76, the Viacom chairman, will be chairman and chief executive of the new company, which will retain the Viacom name. Mel Karmazin, 56, the CBS president, will be president and chief operating officer, and is seen as heir apparent to Mr Redstone.
Under the terms of the deal, CBS shareholders will receive 1.085 shares of Viacom's class B stock. The deal will create a media grouping with an enterprise value of $80bn, the two companies said. The tie-up is the latest in a series of deals that have reconfigured the media scene in America. Walt Disney Co bought Capital Cities/ABC in 1996 for pounds 12bn; Time Warner picked up the empire of CNN owner Ted Turner, and earlier this year, telecoms giant AT&T bought TCI, the cable operator.
NBC, the other major US network, is now the only one without a linkup, and there are widespread rumours that it, too, is on the verge of one. NBC is owned by General Electric.
It is shifts in regulation, above all, that have forced the pace for these massive deals. Viacom was originally spun off from CBS in the 1970s to comply with rules that networks could not own their own programming - rules that have subsequently been repealed. The Federal Communications Commission (FCC) ruled last month that companies could own more than one television station in a city, which sparked discussions between the two groups.
The merged company will have to divest some of its TV stations to meet FCC ownership caps, and Viacom's interest in UPN may have to be sold off since no company can own more than one network.
The merged company will have MTV, Nickelodeon and a host of other cable and pay-TV channels. It will also be the largest TV broadcaster in the US with stations in each of the top 10 markets and in 18 of the top 20 markets, including duopolies in Philadelphia, Boston and Dallas. It will have a strong TV production and syndication operation. "The new company will be greater than the sum of those impressive parts," said Mr Karmazin. "It will be, in a very real sense, the first media company truly positioned for the 21st century."
By linking the veteran network with MTV, the deal also gives CBS greater access to youth and youth programming, a hotly-sought commodity which CBS was perceived to be missing. Combined, the two companies would have annual sales of pounds 13 and an operating cash flow of around pounds 3bn.
Mr Karmazin and Mr Redstone said yesterday the new company will accelerate expansion abroad. In the UK, Viacom could target the market for new cable TV channels and look to build market share in outdoor display advertising.
the new Viacom
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