Viacom Inc.’s stock tanked 9.40% at the close of business on Monday following media reports that its proposed merger with CBS Corp. has been called off. The merger would have given Viacom a much-needed boost after a plethora of management and performance issues that have been affecting it over the past few months.
The merger had been proposed by National Amusement Inc. (“NAI”), this September. NAI owns the majority of voting shares of both Viacom and CBS and is run by the Sumner Redstone and his daughter Shari Redstone. Viacom had also formed a special committee to evaluate the merger earlier.
Reason Behind Cancellation
Viacom had been embroiled in a corporate battle over the past few months, primarily between the Redstones and former CEO Paul Dauman. The corporate issues were ultimately resolved with Paul Dauman resigning from the company. After Dauman’s exit, the company reshuffled its board of directors. Per a recent announcement, the acting CEO – Bob Bakish – has been appointed as the permanent president and CEO of the company.
Additionally, Viacom has been struggling to perform well in a rapidly changing industry. We note that the company’s movie wing, Paramount Pictures, and cable channels have not been performing up to the mark.
This apart, the company faces tough competition from peers like Time Warner Inc. and Discovery Communications .
Per media reports, the Redstones believe that with the change in management at Viacom and the strong business of CBS, the companies should continue to function as separate entities.
CBS has been highly successful in adapting to the concept of online streaming with its channel Showtime. The company is also likely to provide some of its most popular shows for streaming. The company is in a strong position at present and scrapping of the merger might actually work well for it.
Looking Ahead for Viacom
Viacom has underperformed the Zacks categorized Media Conglomerates industry over the last three months. The stock has declined 4.92% compared with the industry, which has advanced 14.41% over the same period.
The deal would have worked positively for Viacom with cost synergies and integration. Hence, it goes without saying that the latest development does not bode that well for the company. Moreover, with the Paramount Pictures minority stake sale being called off earlier and a changing media landscape with viewers shifting to online streaming, Viacom appears to be in a tough spot for now. However, with a reshuffled board and management, the company might be poised for a turnaround and in turn, deliver better performance.
Zack Rank
Viacom carries a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
Image: Bigstock
Viacom (VIAB)-CBS Merger Proposal Cancelled; Stock Down
Viacom Inc.’s stock tanked 9.40% at the close of business on Monday following media reports that its proposed merger with CBS Corp. has been called off. The merger would have given Viacom a much-needed boost after a plethora of management and performance issues that have been affecting it over the past few months.
The merger had been proposed by National Amusement Inc. (“NAI”), this September. NAI owns the majority of voting shares of both Viacom and CBS and is run by the Sumner Redstone and his daughter Shari Redstone. Viacom had also formed a special committee to evaluate the merger earlier.
Reason Behind Cancellation
Viacom had been embroiled in a corporate battle over the past few months, primarily between the Redstones and former CEO Paul Dauman. The corporate issues were ultimately resolved with Paul Dauman resigning from the company. After Dauman’s exit, the company reshuffled its board of directors. Per a recent announcement, the acting CEO – Bob Bakish – has been appointed as the permanent president and CEO of the company.
Additionally, Viacom has been struggling to perform well in a rapidly changing industry. We note that the company’s movie wing, Paramount Pictures, and cable channels have not been performing up to the mark.
This apart, the company faces tough competition from peers like Time Warner Inc. and Discovery Communications .
Per media reports, the Redstones believe that with the change in management at Viacom and the strong business of CBS, the companies should continue to function as separate entities.
CBS has been highly successful in adapting to the concept of online streaming with its channel Showtime. The company is also likely to provide some of its most popular shows for streaming. The company is in a strong position at present and scrapping of the merger might actually work well for it.
Looking Ahead for Viacom
Viacom has underperformed the Zacks categorized Media Conglomerates industry over the last three months. The stock has declined 4.92% compared with the industry, which has advanced 14.41% over the same period.
The deal would have worked positively for Viacom with cost synergies and integration. Hence, it goes without saying that the latest development does not bode that well for the company. Moreover, with the Paramount Pictures minority stake sale being called off earlier and a changing media landscape with viewers shifting to online streaming, Viacom appears to be in a tough spot for now. However, with a reshuffled board and management, the company might be poised for a turnaround and in turn, deliver better performance.
Zack Rank
Viacom carries a Zack Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>