EXCLUSIVE: What’s behind Joe Ianniello’s short-term contract extension: Intense merger talks between CBS, Viacom
For most of the past year, CBS Corporation has been working feverishly to stabilize a company that went from the top of its class as the nation’s premier broadcaster and Wall Street darling to something of an open sore, burdened by allegations of sexual misconduct against its former chief executive and facing an existential question of whether the company can remain independent in a rapidly changing world of television.
On Tuesday, the board of the "Tiffany Network" took a modest step toward dealing with these issues when it decided to give interim chief Joseph Ianniello what could amount to a little more time to remain interim chief, extending his current contract that ends in June for just six more months.
The decision was designed to put a cap on the chaos that has engulfed CBS since the downfall of long-time CEO Leslie Moonves last fall over sexual harassment allegations, and as the CBS board decides on the network’s future, namely, whether the company should remain independent, according to people with direct knowledge of the matter.
With Ianniello’s future secure at least for the moment, the most immediate issue now facing the CBS board: Internal discussions on a merger with Viacom Inc., its sister company in the National Amusements media empire controlled by Sumner Redstone and his daughter Shari, knowledgeable sources told FOX Business.
These people add that Ianniello’s short contract extension is an indication of the increasingly likely merger with Viacom, which has a market value of about $12 billion compared to CBS’s $19 billion. It also reflects the uncertainty over who will emerge as the CEO of the combined outfit.
Despite CBS’s larger size and superior programming, Viacom CEO Robert Bakish is considered the favorite to run the company because of his close relationship with Shari Redstone, who runs National Amusements for her ailing father, these people add. Ianniello’s chances of taking the CEO spot may also be hurt by his close association with Moonves, who before his foromg had waged a public battle with Shari Redstone over the direction of CBS.
"The CBS board is making a smart decision—scale is needed fast for CBS and with Viacom outperforming investor expectations the time to merge is now,” said BTIG analyst Rich Greenfield who has long advocated merging the two companies. “So extend Joe just long enough to get transaction done.”
Spokesmen for CBS and Viacom declined comment; a spokeswoman for Shari Redstone declined comment.
Viacom and CBS are separate companies that were spun out of National Amusements in 2006, though the Redstone family maintains a controlling interest in both businesses. In 2016, and with her 95-year-old father incapacitated, Shari Redstone proposed merging the two companies—a move that was resisted by Moonves who feared a weaker Viacom would drag down the stronger CBS, which was and continues to be a ratings leader, nabbing five of the top 10 television series, according to the company’s February earnings call.
Moonves became CEO in 2003; during the last 10 years of his tenure, shares of CBS rose more than 700 percent, making him one of the nation’s most successful executives and a television programming icon. In contrast, shares of Viacom in recent years have underperformed, forcing the ouster of CEO Philippe Dauman and the eventual appointment of Bakish.
CBS’s lofty status certainly aided Moonves in his battles with Redstone, and in May 2018, Moonves sought to take away Redstone's controlling interest in the network in order to maintain independence or merge with another outfit other than Viacom through a much-publicized lawsuit.
The two sides eventually reached an agreement that gave CBS until September 2020 to possibly find another merger partner before it would consider merging with Viacom.
CBS officials have long argued that they could also remain independent, but as mergers began to sweep the industry and as customers began to “cut the cord” and view programming via streaming services, the company had to at least consider strategic combinations.
It was Moonves’s firing in September 2018 over sexual harassment allegations that was a significant factor in pushing the CBS board to reconsider a deal with Viacom. Another major factor: An apparent lack of interest in CBS from deep-pocketed tech companies that are building their own content.
As a result, a possible merger with Viacom with its programming staples such as MTV and Nickelodeon, began to take form in March, according to people with knowledge of the matter. As FOX Business was first to report, the search for a long-term CEO was being delayed by the board’s discussion of a Viacom merger or some other strategic combination, people with knowledge of the board’s thinking say.
“Who would want a job that might be eliminated,” said one company insider.
Ianniello maintains publicly he’s happy with his new deal and is glad to stay on until the end of the year as the network attempts to come to terms with its future. Details of this most recent financial contract have not been disclosed, but Ianniello was to be paid $70 million at the end of his last contract in June.
But others close to the matter say Ianiello has some misgivings about the meager contract extension and possibly being denied the brass ring he has worked hard for: The chance to run CBS, one of the great names in American broadcasting.
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Ianniello was seen as Moonves’s heir apparent for his deft handling of the network’s finances during his 22 years with the company. The charges of sexual harassment against Moonves have never extended to Ianniello, but he was a key part of the Moonves team, and that association may hurt him, particularly if a Viacom deal materializes.
“This time last year, [Ianniello’s] biggest attribute was being close to Moonves,” said one company insider. “Now it’s the biggest hurdle to overcome.”
