Sumner Redstone and Leslie Moonves in 2012.
Photograph by Matt Sayles — Invision/AP
By Mathew Ingram
September 28, 2016

After a year of Game of Thrones-style intrigue involving 93-year-old billionaire Sumner Redstone, his daughter Shari, and former CEO Philippe Dauman, it looks as though the ultimate fate of Viacom could be settled relatively soon—and with it the fate of sister company CBS.

According to reports by Reuters, the Wall Street Journal, and the Financial Times, the Redstone holding company—National Amusements Inc., which controls 80% of the votes at both Viacom and CBS—is expected to send a letter to both companies soon, recommending they discuss a merger.

If such a deal proceeds, it would be a reunion of sorts for the two media and entertainment companies. The broadcast network was originally part of Viacom, until it was spun off as a standalone entity in 2006. Even farther back, Viacom was actually part of CBS until 1971.

The recombination of the two companies has been one of the scenarios floating around Viacom ever since it became obvious that CEO Philippe Dauman was not going to be long for the job.

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After more than a decade of being Sumner Redstone’s right-hand man, Dauman abruptly fell out of favor earlier this year. Dauman’s reversal of fortune occurred not long after Shari Redstone became more involved in her father’s life following years of being estranged from the aging billionaire.

First, the former CEO was removed from the board of directors of the trust that will control Redstone’s holdings after his death, and then he was forced out of the top job.

Former Viacom senior executive Tom Dooley was named as Dauman’s replacement, but he announced last week that he will be leaving the company soon, which leaves a leadership vacuum at the top of Viacom—a vacuum that makes a merger with CBS even more likely, some believe.

Part of the reason Dauman fell out of favor was that Viacom has badly trailed its peers in the media and entertainment space when it comes to both stock performance and the brand value of its key properties. The shares have fallen by more than 50% in the past two years, and assets like Nickelodeon and MTV are widely seen as being long in the tooth and not forward-thinking enough.

Viacom’s share price (VIAB) jumped by as much as 7% on Wednesday after the first news of a potential merger with CBS was mentioned by Reuters.

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Some analysts believe that combining Viacom with CBS is the only way to revive the flagging fortunes of the company. Supporters of the move say that having CBS chief executive Les Moonves take over management of the combined company would also help its chances of success.

Moonves, however, has been cool to the idea. “We are never going to do something that is bad for CBS shareholders,” he told investors at media conference earlier this month, saying the two companies were not in what he called “active discussions.”

While such mergers are never a done deal until they are signed, the fact that National Amusements is pushing for a combination means it is fairly likely to happen because it controls the voting stock of both companies.

National Amusements is a vehicle that was originally created by Sumner Redstone’s father Michael, to hold ownership of the family’s chain of movie theaters in the 1960s. His son took over the company in 1967 and used it to acquire Paramount Pictures and Viacom, among other deals.

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