Market Overview

Bank Of America Revisits CBS-Viacom Merger Reports

Share:
Bank Of America Revisits CBS-Viacom Merger Reports

The on-again-off-again reports of CBS Corporation (NYSE: CBS) acquiring its sister company Viacom, Inc. (NASDAQ: VIAB) resumed this week with a higher chance of a merger completing compared to prior attempts, according to Bank of America.

The Analyst

Bank of America's Jessica Reif Ehrlich maintains a Buy rating on Viacom with a $39 price target. The analyst also maintains a Neutral rating on CBS with a $58 price target.

The Thesis

CBS's reported interest in acquiring Viacom goes back at least four years and recent reports of renewed talks is "unsurprising" given National Amusements' controlled interest in both companies, Reif Ehrlich wrote in a note. This time around a merger would be easier to close given leadership and board changes at CBS and recent "positive fundamental strides" at Viacom.

The merger also boils down to a "cheap company buying a cheaper company" with CBS's stock trading at a P/E multiple of 8.4 times on 2020 estimates and Viacom's stock at 7.3 times. If a deal occurs at a 15% premium to Viacom's stock, then CBS could benefit from a low-double digit EPS accretion in 2021.

A merger would also generate $500 million in annualized cost savings and additional synergies through cross-selling ad platforms, bundling content sales and making uses of Viacom's international exposure to lift CBS' international distribution, among others, the analyst wrote.

Price Action

Shares of CBS were trading higher by 0.29% Tuesday at $53.51 while Viacom's shares were flat.

Related Links:

Morgan Stanley: CBS Stock Appears Too Cheap

Guggenheim Raises CBS Price Target On Multi-Year Growth Outlook

Posted-In: Bank of America Jessica Reif EhrlichAnalyst Color M&A Reiteration Analyst Ratings Tech Best of Benzinga

 

Related Articles (CBS + VIAB)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
XELMaintains60.0
SOMaintains54.0
SREMaintains141.0
EXCMaintains56.0
ESMaintains77.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
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.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Spotify Investors Show Concern Following Report Apple Could Pay Podcasters

Lear Cuts Guidance, Shares Fall