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Viacom's Special Committee to Review Proposed CBS Merger

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Viacom Inc. (VIAB - Free Report) recently announced that its board of directors has set up a Special Committee of Independent Directors to evaluate the company’s proposed merger with CBS Corp. (CBS - Free Report) . The Special Committee, which comprises independent directors Thomas May, Nicole Seligman, Kenneth Lerer, Judith McHale, Ronald Nelson and Charles Phillips, has been set up in accordance to National Amusements Inc. (NAI)’s request to explore the merger. May and Seligman will also act as co-chairs of the committee.

Last week, Viacom had received a letter from NAI, which owns 80% of the Class A (voting) common stock of both Viacom and CBS directly and through its subsidiaries, with a request to consider the option of a potential merger between Viacom and CBS. Reportedly, the letter reflected NAI’s unwillingness to either accept or support any third party proposal to acquire Viacom.

Details of NAI’s Letter to Viacom

In the letter addressed to both Viacom and CBS’ boards, NAI expressed its optimism about the combined entity being able to offer significant synergies and compete better in the challenging media industry. The letter also underscores NAI’s opinion that the optimal structure for the deal is to be an all-stock transaction. Per the suggestion, stockholders would receive shares of the combined entity equivalent to the amount and class that they currently own in the individual companies. Sumner M. Redstone, Shari E. Redstone or David Andelman will neither vote on this matter nor take part in the related discussions on either company’s side. The letter clarified that NAI was not willing to give up the controlling position in Viacom or the combined company. 

This development follows management changes in Viacom last month, which included resignation of Chief Executive Officer, Philippe Dauman. The company’s board was also reshuffled.

Viacom, which carries a Zacks Rank #5 (Strong Sell) has been struggling over the past few months to grow revenues and boost its bottom line. The company has faced intense competition from peers such as Time Warner Inc. (TWX - Free Report) with business operations across various media like filmed entertainment, cable systems, and television networks and The Walt Disney Co. (DIS - Free Report) , a leading diversified media company. Both Time Warner and Walt Disney carry a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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