The CBS/Viacom merger is the biggest media deal ever

Web posted on:
Tuesday, September 07, 1999 5:10:03 PM EST

From Deborah Feyerick
CNN Financial News Correspondent

NEW YORK (CNN) -- Mike Wallace, make room. The network known for "60 Minutes," Dan Rather, David Letterman, "Everybody Loves Raymond" -- and in the past, for Walter Cronkite and Edward R. Murrow -- is being bought by entertainment giant Viacom, owner of MTV, VH1 and Nickelodeon.

This promises to be one of the biggest deals of its kind, creating a major media and entertainment company with both broadcast and cable channels.

Viacom plans to buy almost $34.5 billion worth of CBS stock, creating a company with $80 billion in assets. That's to be the largest media transaction on record. Sumner Redstone, Viacom's 76-year-old chairman, calls the proposed Viacom-CBS union "king -- not just in content, but in distribution, marketing and packaging." He predicts the merger will completely alter the media landscape.

"Look at the assets we bring together," Redstone told a news conference in New York on Tuesday. "We bring together a great studio and the most powerful cable networks in the world. We add that to CBS network, CBS' wonderful television station, CBS Radio, CBS Outdoor Advertising and soon we're adding (syndication company) King World to it. There's no company in the world that has that mix of assets. This will be the fastest-growing media company in the world."

"The benefit to the network would certainly be the ability to have younger demographics," says CBS head Mel Karmazin, 56, "and cable channels that could be worked together with the network. It gives us more platforms in which to promote the network."

Under the plan, Redstone will be chairman and CEO of the new, larger Viacom, while Karmazin becomes president and chief operating officer.

QUICK VOTE

Do you think UPN will sink or swim because of the Viacom-CBS deal? Sink Swim Don't watch, don't care View Results

By joining television, radio, films, books and the Internet, the company would become the largest seller of advertising. Viacom also owns Blockbuster Video, Paramount Pictures, Spelling Entertainment, Simon & Schuster Publishing and several amusement parks.

CBS and Viacom are old friends. Viacom spun off from CBS in the early 1970s to get around government rules preventing networks from owning their own programming. But last month, the Federal Communications Commission (FCC) relaxed rules to allow companies to own two TV stations in the same market.

"We are siblings separated in 1971 and are today reunited," Redstone said. "This partnership seems almost dictated by destiny."

Walt Disney set the last media megadeal, buying Capital Cities/ABC for $19 billion. The Viacom-CBS deal is subject to certain conditions, including FCC approval as well as the approval of CBS shareholders.

Analysts don't expect regulators to pose a major problem, but they say the conjoined companies may have to sell off some TV stations to satisfy federal ownership rules. CBS owns 15 stations and Viacom 19, with the two groups overlapping in five markets.

Viacom's 50-percent interest in the struggling UPN network may have to be sold or folded into CBS to comply with a rule that bans a company from owning more than one TV network.

But it's anticipated that Viacom-CBS, if the deal becomes reality, will reach as much as 42 percent of the national audience.

Reuters contributed to this report.