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Why CBS and Viacom didn’t merge, according to Shari Redstone

She said she would have worked well with Les Moonves on a combined company.

Shari Redstone at Code 2017 Asa Mathat

CBS and Viacom, two of the biggest media companies in the U.S., are effectively controlled by Shari Redstone. Last year, she asked the companies to consider a merger to better compete against the internet.

That didn’t happen.

There was better value in keeping them apart, Redstone said, but she offered a more detailed take Wednesday at the Code Conference at the Terranea Resort in California.

There was more potential in Viacom, she explained. The company, which owns MTV and Nickelodeon, had struggled for years after relying too heavily on reality programming, content that readily populates the internet.

CBS was the profitable one, and while Redstone really wanted its chief executive, Les Moonves, to run the combined company, he declined, and so she moved on.

But that’s what makes this comment from Redstone really interesting to hear now:

“I have a great relationship with Les, and I think that we would have worked really well together on a combined company.”

Media watchers might take that to mean she still wants a deal to happen, but to dissuade you from such a reading, here’s a lightly edited transcript of the exchange she had with Senior Editor Peter Kafka on the topic (emphasis in bold mine):

Peter Kafka: Let’s talk about CBS and Viacom. You end up controlling these two companies. They’re both very big media companies. At one point Viacom was going to be the star and now CBS is the star ...

Shari Redstone: They’re both stars.

PK: They’re both your children ...

SR: And I love them.

PK: Last fall you put out a press release that says more or less we’d like to combine these two companies ... turned out the deal didn’t happen. Why didn’t it happen?

SR: We wanted independent committees formed at each company to explore whether or not it made sense. It was an exploration that needed to take place. We told both companies to go down parallel tracks, CBS obviously continuing to do what they were doing and doing very well.

Viacom actually had a transition and transformed itself, and what I saw very quickly was the energy that existed at Viacom. I spent a lot of time with [new CEO] Bob Bakish, who had been running international and running it very successfully for many years. We talked about it, and what became apparent to me very quickly was that our assets were severely undervalued, which I had understood, but what I didn’t understand at the time was the significant upside that existed in our businesses once we had a good management team in place and the culture came back.

We organized the company. We had a vision, we had a strategy — to many people in this room, you might think having vision and strategy in a public company automatically happens. Well, trust me, after many years at Viacom, having a vision and having a strategy was a new thing. What I felt is if we were to do a merger at that time, the momentum that had built so quickly so strongly would have been squashed.

PK: To put a fine point on it, most people who follow this say what happened is you wanted Les Moonves to run both companies and for whatever reason, he didn’t want to do that.

SR: I have a great relationship with Les, and I think that we would have worked really well together on a combined company, but I think, like I said, at that point in time, you look at the valuations: We were undervalued. The change for me was, ‘Oh my god, there is potential here, there is opportunity here, we can do this.’ ... And it took me some time to figure out because, to be honest, I wasn’t the most welcome person at Viacom for the few years prior to the ultimate changes.

PK: What changed?

SR: What changed was great new management and a fantastic board.

Watch her full interview at the Code Conference below.

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