With National Amusement abandoning the merger of Viacom with CBS, increased partnering between both seems to be the next logical step. Its $12 billion debt profile could discourage it to aggressively pursue companies.
In an industry where scale matters, National Amusements Inc’s decision to abandon the merger of its prized assets Viacom Inc with CBS Corp is likely to leave it under pressure to either buy or partner with an industry peer.
Last month, during the NY Times Dealbook conference, Shari Redstone, the daughter of Sumner Redstone, who has a controlling stake in National Amusements along with his daughter, said that scale was crucial for both companies since it provides greater content distribution and pricing power.
However, as per sources familiar with the matter at hand, National Amusements has backed off from the merger and have instead opted to focus on their respective operational strategy.
However, sources feel that both companies are likely to come under immense pressure and consider the acquisition failing which they are likely to partner with other media companies.
“Should Viacom remain independent, we think it will need a strategic partner to help co-finance a larger and more expensive film slate,” said Brean Murray, an analyst at Alan Gould, in a research note to clients.
Both, Viacom, CBS and National Amusements declined to comment.
Sources have preferred the cover of anonymity since the deliberations are confidential.
Sources have further revealed that Were Bob Bakish, the permanent replacement of outgoing CEO Philippe Dauman, could look for partners across the Atlantic and entirely skip the fiercely competitive U.S. media market.
If this were to happen, the likely targets could be Britain’s ITV Plc, Germany’s ProSiebenSat 1 and Canada’s Entertainment One.
Incidentally, Viacom has accumulated $12 billion debts, so it’s unlikely to pursue acquisitions aggressively. Nonetheless, Viacom could pursue smaller companies to boost its Paramount movie studio.
As per John Janedis, an analyst at Jefferies LLC, CBS should be focussing on buying “TV-centric content related assets, rather than cable networks and film.”
However, Leslie Moonves, CBS’s CEO, in recent weeks had shown an interest in Sony Pictures and had approached Sony Corp, which had not shown any interest in selling.
Sony declined to comment.
Alternatively, National Amusements could explore partnerships, including between Viacom and CBS.
Already, Bakish has been meeting with the heads of Viacom affiliates and has discussed potential partnerships, said a source.
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