Reunited? CBS and Viacom Are Talking About It

A new chapter opened Thursday in the drama over the future of the $37 billion Redstone media empire, with CBS Corporation and Viacom announcing plans to explore a reunion, reigniting a plan that fizzled a little more than a year ago.

In simultaneously released statements, CBS and Viacom — which were part of the same company from 2000 to 2006 — said that their boards had created special committees of independent directors to “evaluate a potential combination.” Yet the companies cautioned that there could be “no assurance that this process will result in a transaction or on what terms any transaction may occur.”

In rekindling the possibility though, both companies are acknowledging that they must get bigger to remain competitive in a media industry that now prioritizes scale.

In the past year, The Walt Disney Company has agreed to buy most of 21st Century Fox in a deal that would form an entertainment colossus for the age of streaming. AT&T is still pursuing an $85.4 billion acquisition of Time Warner. At the same time, traditional media companies are contending with technology companies like Apple and Facebook that have moved into the entertainment business.

“While it never was the case that you need scale to have a successful business, it becomes a more credible proposition to investors to say that you need it,” said Brian Wieser, a senior analyst at Pivotal Research. “Investors believe that scale equals clout and clout equals pricing power with both suppliers and customers.”

The ailing 94-year-old media mogul Sumner M. Redstone took control of Viacom in 1987, through National Amusements, the private theater chain started by his father. He then went on to acquire CBS in 2000 in a nearly $40 billion deal. Mr. Redstone split the two companies apart in 2006 amid uncertainty about the future of both businesses.

Thursday’s development echoes moves made by the companies in September 2016, after Mr. Redstone and his daughter, Shari Redstone, demanded the reunification of CBS and Viacom following a tumultuous year that led to the ouster of Viacom’s chief executive, Philippe P. Dauman. (Through National Amusements, the Redstone family controls about 80 percent of the voting stock in both CBS and Viacom.)

Yet those plans relied largely on winning over Leslie Moonves, the chairman and chief executive of CBS, whom Ms. Redstone wanted to lead the combined company. Mr. Moonves expressed skepticism about how such a deal would benefit both Viacom, which had been struggling, and CBS, which had been delivering strong results. In addition, Mr. Moonves was seeking strategic and operational freedom over the combined companies.

Three months later, the merger talks fell apart. Viacom, with Ms. Redstone’s support, named Bob Bakish as its new chief executive. In the year since, Mr. Bakish has worked to revive the company by reinvigorating MTV, Comedy Central and other Viacom TV networks for the digital age, bringing growth to the Paramount Pictures studios and expanding the company’s international footprint.

But both companies face challenges keeping pace in an increasingly digital world, especially amid the merger frenzy that has swept across the media industry. “As the world around CBS and Viacom will soon be inhabited by giant companies with endless balance sheets, the reality of the current arms race has recently weighed on these two stocks,” Michael Nathanson, an analyst with MoffettNathanson Research said in a recent research note.

In a statement on Thursday, National Amusements said that it supported “the processes announced by CBS and Viacom to evaluate a combination of the two companies, which we believe has the potential to drive significant, long-term shareholder value.”

Mr. Wieser, the media analyst, noted that a deal could also be aimed at more firmly establishing a successor to Mr. Moonves, 68. “Shari Redstone is more firmly in control,” he said. “She has her person in place at Viacom and potentially a successor she’d like to see to Les Moonves.”

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