NEW YORK (AP) -- Viacom Inc. is buying CBS Corp. in the richest
media merger in history -- a $36 billion deal that combines the
owner of hip properties like MTV and VH1 with the old-line network
that brought you "60 Minutes" and "Murder, She Wrote."
CBS, which changed hands just four years ago when it was bought
by Westinghouse Electric Corp., will now become part of a radio, TV
and film powerhouse to rival conglomerates like Time Warner Inc.
and Walt Disney Co.
The merger is the biggest in the media business since Disney's
purchase of Capital Cities/ABC for $19 billion in 1996.
Under the deal announced Sept. 7, Viacom will own last season's
top-rated TV network, as well as Paramount Studios, MTV, VH1,
Nickelodeon and the Simon & Schuster publishing house.
The new company will be called Viacom, but the CBS name -- which
carries the legacy of Walter Cronkite and Edward R. Murrow -- will
remain on the network.
"We will be global leaders in every facet of the media and
entertainment industry, financially strong from day one, with an
enviable stable of global brands," Viacom chairman Sumner Redstone
Redstone will be chairman and chief executive of the new entity,
but CBS management will have a major role. CBS President Mel
Karmazin, 56, will be president and chief operating officer,
becoming heir apparent to Redstone, who is 76.
Analysts praised the deal as a good fit. CBS will get a TV and
film studio to provide shows for its network, while Viacom gains
major advertising outlets to promote the films and shows produced
by Paramount and its Spelling Entertainment TV studio.
"It's a good deal for everybody," said Chris Dixon, a media
analyst at PaineWebber Inc. "You need to be big. You need to have
a global presence."
While many of Viacom's properties have catered to a youthful
audience, CBS has been successful with older viewers who are
attracted to shows like "60 Minutes," "Diagnosis: Murder,"
"Touched by an Angel" and, before it went off the air a few years
ago, "Murder, She Wrote."
The deal faces some regulatory hurdles, but analysts said they
see no major problem. The company may have to sell some TV stations
to meet federal ownership rules, and Viacom's half-interest in the
struggling UPN network may have to be sold or folded into CBS
because of a rule that bars a company from owning more than one TV
The deal would be the latest transformation of CBS, which was
founded in 1927 and became known as the "Tiffany Network" under
the leadership of William Paley. He was installed as leader of the
fledgling broadcasting business when it was purchased in 1928 by
his cigar-maker father, Sam.
Media mogul Ted Turner pursued CBS before it was sold in 1995 to
Westinghouse by Paley's successor, Laurence Tisch.
Westinghouse shed its industrial and nuclear power businesses
and took the CBS name. As it expanded into media, it acquired
Infinity Broadcasting, which was led by Karmazin.
Analysts said the deal had its roots in talks between the two
companies about combining their TV stations. Many media companies
have been talking about such deals since the Federal Communications
Commission ruled last month that companies can own more than one TV
station in the same city.
The company that became Viacom was spun off from CBS in the
1970s because of government rules, which have since been repealed,
that prevented networks from owning their own programming.
Since then, Viacom has grown into a major player in media and
cable, forming the pay channel Showtime in 1978, acquiring MTV in
1986, and buying Blockbuster Video and Paramount in 1994.
TV networks have increasingly been trying to cut programming
costs by assuming ownership of the shows they air. Paramount
Network Television produces eight shows that will air this fall,
all but one of them already on CBS or UPN. The one exception is a
lucrative property: NBC's hit comedy "Frasier."
Under terms of the deal, CBS shareholders will receive 1.085
shares of Viacom's class B stock.
When it was announced, the deal's value was $48.89 a share. But
Wall Street reacted to the announcement by pushing up the shares of
both companies, boosting the value of the deal.
In late trading, Viacom stock was up 4.7 percent, or by $2.121/2,
at $47.183/4 a share on the New York Stock Exchange, where CBS was up
almost 4 percent, or by $1.933/4, at $50.811/4 a share.
Based on the price of Viacom's shares, the deal was worth $51.20
for each CBS share, or $36.08 billion.