The ViacomCBS Merger and Its Place in the Big Media Space
After a three-year campaign by Shari Redstone, Chairwoman of the two companies and daughter of media mogul and billionaire Sumner Redstone, Viacom and CBS merged to become ViacomCBS, Inc. on December 4, 2019 in an all-stock transaction worth nearly $12 billion. (Meg James, Los Angeles Times). The newly merged company was listed on the Nasdaq on December 5, 2019 under the tickers “VIACA” as the Class A stock and “VIAC” as the Class B stock. (Staff, Business Wire). CBS and Viacom are two mass media companies that create and distribute content across a variety of platforms in almost every field of media and entertainment. Id. In previous years, the two companies have merged twice with their most recent merge occurring in 1999, lasting until 2006 where Sumner Redstone split the merged entity. (Jonathan Barr, Forbes). This history makes the two media giants no strangers to federal regulatory authorities, and the merger follows the lead of other major players in the entertainment industry (“Big Media”).
The Securities and Exchange Commission (“SEC”) regulates sales and transfers of securities, and the Antitrust Division of the Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) police anti-competition matters. (Ann Beth Stebbins and Thomas Kennedy, International Comparative Legal Guides). Prospective mergers are often assessed on the potential for negative consequences that would result from a union of two companies, but a vast majority of aspiring mergers are approved by the FTC despite the potential for anti-competitive issues. (“Mergers”, Federal Trade Commission). Since mergers between two large companies often present antitrust issues, the transactions are governed by the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. (“Antitrust Laws”, Federal Trade Commission). Applicable here, Section 7 of the Clayton Act (“Act”) prohibits mergers and acquisitions when the effect “may be substantially to lessen competition[] or tend to create a monopoly.” (“Mergers”, Federal Trade Commission). The FTC and DOJ’s Horizontal Merger Guidelines set out an analytical framework that determines if a horizontal merger—a proposed merger between direct competitors—will fall inside the Act’s prohibitive standard. Id.
The ViacomCBS Merger comes in the wake of a number of Big Media mergers, creating direct competition between the mega-companies for snagging market share in the streaming space. (Peter Csathy, Forbes). Specifically, other conglomerates who merged in 2019 include AT&T with Time Warner, Disney with Fox, and Comcast NBC Universal with Sky. Id. At the same time, Big Tech companies – namely Apple, Amazon, Google, and Verizon – have their sights set on acquiring media companies in 2020 to enhance their reach to consumers, opening up antitrust questions in their own right. Id. Therefore, to keep up with the competition, ViacomCBS’ next strategic move will likely be to acquire other smaller media companies in an effort to expand their reach and increase content subscribers. (Peter Kafka, Vox). ViacomCBS wasted no time in doing so as they agreed to acquire a 49% stake in Miramax, an entertainment company involved in producing TV shows and movies, for $375 million just two weeks after the merger. (Billy Duberstein, The Motley Fool).
ViacomCBS may also look to other partnership opportunities with the remaining majority owner, BeIN Group, in an effort to expand beyond traditional television outlets. Id. However, despite ViacomCBS’ merger and subsequent growth from their acquisition of PlutoTV and investment in Miramax, analyst Richard Greenfield of LightShed Partners predicts that 9% of ViacomCBS’ jobs could be at stake. (Paul Bond, Hollywood Reporter). According to the most recent filings before the merger, Viacom had 10,400 full-time employees while CBS had 12,770 full-time employees. Id. Greenfield estimates that roughly 2,000 of those jobs could be lost due to corporate synergy. Id. Nonetheless, with ViacomCBS joining the arena of Big Media mergers, their role in the space will be something to watch in 2020 as they remain a key player among media conglomerates commanding the highest proportion of U.S. TV audience at 22%. (Billy Duberstein, The Motley Fool).