What's going on?
It was only a month ago that the battle for control of cable giant Viacom ended, and now its controlling shareholder, the family-owned National Amusements, is moving quickly to try and re-combine Viacom with CBS Corp. (the two split into separate companies in 2006). The kicker? National Amusements also controls CBS…
What does this mean?
The idea behind the 2006 split was that Viacom’s burgeoning cable TV business would grow way more quickly than stale, old CBS. Well, that turned out to be wrong thanks to this new thing called streaming (think: Netflix), which is now seriously hurting the cable TV business (think: MTV and Comedy Central, which Viacom own). CBS, however, has successfully grown revenue by creating hit shows and innovating quickly (e.g. its own streaming service, CBS All Access). National Amusements likely thinks that Viacom will be able to recover better if it re-joins the CBS tent.
Why should I care?
For the stocks: It’s debatable whether this is a good idea for CBS.
It’s not clear that saddling itself with a struggling cable giant would be the best thing for CBS; it’s doing pretty well on its own, thank you very much. Nevertheless, there might be some “synergies” like integrating MTV and Comedy Central’s content onto CBS’s platform. Obviously, the price that CBS would (effectively) have to pay for Viacom will be a key variable in evaluating any possible deal.
The bigger picture: Beware the “controlling shareholder.”
National Amusements doesn’t own the majority of either company, but it does own the majority of the “voting stock.” Various other companies, including Alphabet, have a similar shareholder structure. Conflicts can arise when the controlling shareholder has different interests than non-voting shareholders (as may be the case here).