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Scale Issue is Left Lingering by Abandoned CBS, Viacom Merger

Scale Issue is Left Lingering by Abandoned CBS, Viacom Merger
Sumner Redstone's holding company National Amusements Inc is under pressure to buy or partner with peers in an industry where scale matters after its decision to abandon a merger of its prized media assets, CBS Corp and Viacom Inc.
Scale was crucial for both companies, because it would give them greater pricing power in content distribution, said Redstone's daughter Shari, who controls CBS's and Viacom's controlling shareholder National Amusements together with her father, told the New York Times Dealbook conference last month.
If media reports, quoting sources, are to be believed, National Amusements, however, does not currently want to sell either company. Since they are focused on executing their operational strategy media reports said that the chief executives of CBS and Viacom are also currently not keen on making big acquisitions.
However, sources have reportedly said that if they come under more competitive pressure, the two companies may be forced to consider acquisitions. as an alternative to outright acquisitions, they may also turn to partnerships with media companies.
"Should Viacom remain independent, we think it will need a strategic partner to help co-finance a larger and more expensive film slate," Brean Murray analyst Alan Gould said in a research note on Monday.
There were no comments on CBS, Viacom and National Amusements.
As some industry giants have sought to merge with major distributors of their content, in a bid to expand their reach and profitability, pressure on media companies to consolidate has increased in the last two months.
While last week Rupert Murdoch's Twenty-First Century Fox Inc reached a preliminary agreement to acquire the 61 percent of Sky Plc it does not already own, valuing the British broadcaster at $23 billion, in October, U.S. telecommunications giant AT&T Inc agreed to acquire media conglomerate Time Warner Inc for $85.4 billion.
Viacom has already been looking at some modest acquisitions. In 2014 it paid $760 million for British broadcaster Channel 5 and last month it acquired Argentine broadcaster Telefe for $345 million in cash.
Were Bob Bakish could again look across the Atlantic for opportunities beyond the fiercely competitive U.S. media market, the media said, were Bob Bakish, who was named on Monday as the permanent replacement of previous Viacom CEO Philippe Dauman, to explore more acquisitions.
Media report identified ITV Plc in Britain and Entertainment One in Canada apart from German broadcaster ProSiebenSat 1 and its main rival, RTL Group, as the logical targets. However Viacom is unlikely to spend top dollar on acquisitions due to its $12 billion debt pile.
However Viacom’s Paramount movie studio could be boosted by smaller deals for it to pursue. Some media bankers suggested that acquiring MGM could help boost Paramount's margins as it owns a film library and has been exploring its options for some time following its emergence from bankruptcy six years ago.
CBS should focus on buying "TV-centric content related assets, rather than cable networks and film", noted Jefferies LLC analyst John Janedis in a research note.

Christopher J. Mitchell

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