Redstone Wants Viacom, CBS To 'Explore' Merger

(Reuters) -- Sumner Redstone's National Amusements Inc (NAI), the controlling shareholder of CBS Corp (CBS.N) and Viacom Inc (VIAB.O), is preparing to call on the two media companies to explore a merger, two people familiar with the matter said on Wednesday.

NAI may contact the two companies as early as this week to ask them to form independent board committees to explore a combination, one of the people said.

The sources asked not to be identified because the deliberations are confidential. Representatives for NAI, Viacom and CBS declined to comment.

Viacom shares jumped as much as 5 percent on the news and were trading up 1.4 percent at $35.96 in New York, giving the company a market value of $14.5 billion. CBS shares were flat, hovering around $52.22, giving the company a market capitalization of $23.2 billion.

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National Amusements, the privately held movie theater company owned by Redstone and his daughter Shari Redstone, own 80 percent of the voting shares of Viacom and CBS.

Viacom was spun off from CBS 10 years ago, but Shari Redstone has been in favor of recombining the two under the leadership of CBS CEO Leslie Moonves, sources have previously told Reuters.

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Industry speculation that the two might recombine has picked up pace over the past few weeks, after the Redstones prevailed over a power struggle that resulted in the departure of Viacom Chief Executive Officer Philippe Dauman.

National Amusements, which is controlled by Sumner Redstone and has nearly 80% voting stakes in both companies, is preparing a letter it plans to send to the boards as soon as this week, according to The Wall Street Journal.

Such a move would come after Mr. Redstone’s daughter, Shari Redstone, rose to power in her father’s $40 billion empire after a bruising power struggle that played out this summer. She is president of National Amusements and is set to wield great influence over the family’s holdings when Mr. Redstone, who is 93 and ailing, dies.

A CBS-Viacom deal would be a reunion. Viacom acquired CBS in 2000 and the companies split in 2006.

For Viacom, the deal would come at a moment of great vulnerability, as the company struggles with underperforming assets like its Paramount Pictures studio and a cable networks group that includes MTV and Comedy Central. That has led to a major slide in the company’s stock price.

A merger could potentially provide a strong leader for Viacom in the form of CBS CEO Leslie Moonves, a favorite of media investors. Viacom announced last week that its interim CEO, Tom Dooley, was planning to leave in November.