Can CBS and Viacom Make a Deal This Time?

Viacom averted potential revenue loss of $1.0 billion

The talks to combine CBS (CBS) and Viacom (VIAB) (VIA) could restart any time. The New York Post reported last month that CBS was preparing to approach Viacom with a takeover offer. Viacom may have become a more attractive takeover target for CBS, as it has settled its programming dispute with AT&T (T). The settlement averted the blackout of Viacom channels on AT&T-owned satellite broadcaster DIRECTV. The settlement also averted a potential loss of around $1.0 billion in programming fee revenue for Viacom.

After clearing the programming standoff with AT&T, Viacom reaffirmed its guidance for fiscal 2019 domestic affiliate revenue growth. Viacom said in February that it was expecting its domestic affiliate revenue to grow in the low-single-digit percentage in fiscal 2019.

Can CBS and Viacom Make a Deal This Time?

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Sharing leading slots to dominate merger talks

CBS and Viacom have common ownership. Both companies are controlled by the family of Sumner Redstone through an entity called National Amusements. An attempt last year to merge CBS and Viacom sparked tensions, leading to CBS suing the Redstone family. CBS and the Redstone family later reached a settlement, with the Redstone family agreeing not to pursue a merger between CBS and Viacom for about two years. The settlement didn’t prohibit CBS and Viacom directors from discussing a merger of the companies on their own. A major sticking point in the previous merger attempt was who would become the chief executive officer of the combined company. Reopened merger talks between CBS and Viacom are expected to center on the CEO issue.

CBS reported revenue growth of 3.0%

CBS made a profit of $561 million on revenue of $4.0 billion in the fourth quarter, which ended in December. Revenue increased 3.0% YoY. Revenue was nearly flat year-over-year at Viacom in the December quarter. Comcast (CMCSA) and Charter Communications (CHTR) recorded revenue growth of 6.0% and 26% YoY, respectively, in the December quarter.