Market Overview

CBS Wants To Pay Less Than Market Value For Viacom

CBS Wants To Pay Less Than Market Value For Viacom
Related CBS
Pivotal Updates Media Outlook, Upgrades Viacom
Jim Cramer Weighs In On AutoZone, Chevron, Turtle Beach And More
Analyst: CBS, Viacom sure to merge this year (Seeking Alpha)
Related VIAB
Pivotal Updates Media Outlook, Upgrades Viacom
Benzinga's Top Upgrades, Downgrades For January 15, 2019
Analyst: CBS, Viacom sure to merge this year (Seeking Alpha)

CBS Corporation (NYSE: CBS) is exploring a move to acquire Viacom, Inc. (NASDAQ: VIAB) in an all-stock deal, which values Viacom below its current valuation, Reuters reported. Despite the unusual offer of buying a company for less than what it's worth on the public market, KeyBanc is supportive of the deal.

The Analyst

KeyBanc Capital Markets' Andy Hargreaves maintains a Sector Weight rating on CBS with no assigned price target.

The Thesis

Viacom's stock closed Monday at $30.55 and a $30 per share take-out offer from CBS implies "significant" potential accretion, Hargreaves said in a research report. Specifically, the combined companies could generate a pro forma 2018 EPS of $6.34 with cost synergies at 15 percent of estimated SG&A at Viacom. The earnings growth potential through cost savings would exceed what CBS could achieve on its own even if the deal results in top-line growth declines.

Viacom's networks and library under the CBS umbrella would prove to be valuable in expanding its reach and lowering churn of CBS's direct-to-consumer services, the analyst wrote.

CBS could sell some of the acquired Viacom assets to other parties for a premium to the implied value in the stock price, according to Hargreaves. For example, a sale of Nickelodeon production assets would still improve the total economic value to CBS.

Price Action

Shares of CBS were trading higher by 2 percent at $51.69 Monday morning, while shares of Viacom were flat.

Related Links:

Loop Capital Markets Assesses The Media, Entertainment Space

Wells Fargo On A CBS-Viacom Reunion: 'We Don't Like It'

Latest Ratings for CBS

Jan 2019Moffett NathansonUpgradesNeutralBuy
Jan 2019Stephens & Co.UpgradesEqual-WeightOverweight
Nov 2018Goldman SachsInitiates Coverage OnNeutral

View More Analyst Ratings for CBS
View the Latest Analyst Ratings

Posted-In: Andy Hargreaves KeyBanc Capital Markets tvAnalyst Color News Top Stories Analyst Ratings Media Best of Benzinga


Related Articles (CBS + VIAB)

View Comments and Join the Discussion!

Latest Ratings

EMNMorgan StanleyUpgrades90.0
DERMRaymond JamesUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

The Market In 5 Minutes: Musk, Spotify, Apple-Intel, CBS-Viacom And More

Benzinga Pro's 5 Stocks To Watch Today