MoffettNathanson analyst Michael Nathanson thinks the idea makes financial sense and would be good for shareholders, noting the combined operation would save as much as $400 million in costs.
In a recent report to investors, Nathanson called the 2005 separation of the two companies an “ill-fated move” that has never made any sense to him. Nathanson has been pushing for a “recombination” for the past year despite strong opposition from CBS executives. “Nothing will be solved until the pieces are put back together again,” Nathanson says. “We just aren’t sure how or when that happens.”
But Wells Fargo analyst Marci Ryvicker doubts a rollup will occur without the “blessing” of CBS chief executive Leslie Moonves. “We believe that Les is aware of CBS’ structurally advantageous position as a standalone broadcast network,” she writes in a note to clients. And Ryvicker says her analysis shows a merger would be “destructive” to the company’s overall value.
“We believe Viacom needs to be fixed—not slapped onto another company,” she says. “The best way to do this, in our view, is to hire a CEO who is solely focused on Viacom and now has the incentive and wherewithal to make big strategic change and investment.”
When CBS and Viacom were split apart at the start of 2006, the thinking was CBS, with its radio and broadcast TV businesses, would be the “slow growth” company. But the media landscape has rapidly evolved, and it’s been Viacom that has been bogged down with slow-growing cable networks and few digital opportunities for its movie business. As a result, since the CBS-Viacom split, CBS’ stock price has increased 104% compared to a 5% gain for Viacom’s shares.
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