Former Sell-Side Analyst On The Comcast-CBS Deal Rumors

Ever since AT&T Inc. T agreed to buy Time Warner Inc TWX for $85.4 billion, rumor mills have been churning out various M&A scenarios. One such speculation making the rounds is Comcast Corporation CMCSA could buy CBS Corporation CBS as part of its diversification strategy.

But, Martin Pyykkonen, an independent analyst and 20-year market veteran, told Benzinga that the rumored deal is unlikely to happen, and CBS may be more interested in a merger with Viacom, Inc. VIAB.

Pyykkonnen, a former sell-side analyst at Rosenblatt Securities, said, “CMCSA wanting CBS would actually be similar to their move to acquire NBCU (broadcast network, cable CHs, film studio).”

“I don’t think CBS would be a quick seller – aside from possible consolidation with VIAB, I think (Leslie) Moonves would balk unless maybe a significant premium offer,” the independent analyst told Benzinga.

CBS is a media and entertainment company, owning CBS Television Network and Studios. The company's cable networks segment consists of Showtime Networks, CBS Sports Network and Smithsonian Networks.

CBS has been a content partner and has a multi-year deal (nearly five of the 10 years left) with Comcast. Pyykkonnen noted that such deals are normal in the industry and should not to be construed as a base for acquisition.

In addition, the analyst said there would be more regulatory scrutiny on a Comcast-CBS merger, despite it being a vertical integration and there not being much overlap between the two companies.

“[E]ven though it would be a fairly clean (not much overlap) vertical integration, it would face regulatory challenges – simply because CMCSA would own 2 of the 4 broadcast networks (NBC, CBS) with the others remaining being ABC under DIS and FOX – probably challenges from DOJ and FCC, would be my guess,” Pyykkonnen added.