Friday, May 01, 2020

Rumor: ViacomCBS Could Be Purchased – Financial Analyst Says Time Is Ripe For Takeover

A new rumor indicates that ViacomCBS could be up for sale with Netflix being a potential buyer.

The rumor comes from comic book writer and YouTuber Grace Randolph, reports Bounding into Comics.

She took to Twitter to write, “Okay here’s some Friday tea for you. As we’ve been hearing, Apple MIGHT buy Disney. But also Netflix MIGHT buy Viacom (CBS / Paramount, etc).”

She adds, “Super rumor stage, but that’s what’s being sipped in Hollywood right now…”

The rumor is not without merit. Financial website Seeking Alpha recently published an article by Tom White detailing that the newly formed ViacomCBS is a “prime takeover target.”

ViacomCBS was formed following Viacom and CBS recombining in December 2019.

White explains, “Based on the current stock price, the totality of the company’s assets are not fully valued by the market, which is why a potential acquirer could buy them at a discount.”

In fact, White believes that “Paramount Pictures alone is worth more than what ViacomCBS’ stock is worth,” citing Paramount Picture's film library, which boasts over 2,500 movie titles including the Mission: Impossible series, classic films such as The Godfather and one of the highest grossing films of all time, Titanic. ViacomCBS, the parent company of Paramount Pictures, also owns other properties such as Nickelodeon, Showtime, Comedy Central, BET, MTV, the Smithsonian Channel and publisher Simon & Schuster. In addition, with the recent re-merger with CBS last December, the company now has a library of over 30,000 TV episodes.

White even suggests that “top distributors should consider acquiring the company to lock down the rights to the content and add it to their own library.”

As for who White believes could acquire ViacomCBS, he points to Netflix, Amazon, and Apple.

In specifically talking about Netflix, White believes the acquisition would make sense because it would allow Netflix to compete with Disney Plus and attract younger audiences with Nickelodeon, specifically the wildly popular SpongeBob SquarePants - something Netflix and Nickelodeon are already doing following striking an output deal in November that will yield original animated feature films and TV series based on existing Nickelodeon library characters as well as newly created ones - including two new SpongeBob SquarePants features. Nickelodeon has also sent series such as Glitch Techs and Pinky Malinky, as we as the network's Invader ZIM: Enter the Florpus and Rocko's Modern Life: Static Cling to Netflix - so we could see Adventures in Wonder Park released on the streaming service, too.

However, he doesn’t believe Netflix has the resources to acquire ViacomCBS.

White explains, “Netflix may not have the financial resources to absorb this acquisition since it currently has only $5 billion in cash.”

He adds, “To pull off this deal, it would have to either use its stock as its currency or fund the deal by issuing more debt.”

White also writes off Apple believing ViacomCBS’ content does not fit in with Tim Cook’s plan for its Apple TV+ service.

He does believe Amazon Prime would be the best fit given ViacomCBS’ content fits in with Amazon’s content strategy and the company also has cash flow to purchase the company. He also believes that Amazon would be able to properly incorporate CBS’ TV stations given their ownership of The Washington Post. Amazon currently has a partnership with Amazon for the NickHits Prime Channel.

White believes that whoever purchases ViacomCBS should offer between $25-$30 billion.

Netflix does have an established business relationship with ViacomCBS as they license the old Star Trek series. Nickelodeon themselves are currently developing a new animated Star Trek series aimed towards younger audiences.

While these rumors are swirling and at least one financial analyst believes the time is ripe for a takeover, ViacomCBS appears to be moving forward on its own.

In their Q4 Earnings Presentation President and CEO Bob Bakish stated, “In less than three months since completing our merger, we have made significant progress integrating and transforming ViacomCBS. We see incredible opportunity to realize the full power of our position as one of the largest content producers and providers in the world.”

He added, "This is an exciting and valuable place to be at a time when demand for content has never been higher, and we will use our strength across genres, formats, demos and geographies to serve the largest addressable audience, on our own platforms and others.”

Bakish then detailed their plans for 2020 and beyond, “In 2020, our priorities are maximizing the power of our content, unlocking more value from our biggest revenue lines and accelerating our momentum in streaming. With this as a backdrop, we’ve set clear targets for the year and are providing increased transparency around our business to demonstrate ViacomCBS’ ability to create shareholder value today, as we continue evolving and growing our business for tomorrow.”

Bakish also announced that they plan to expand CBS All Access. He stated, “To complete our portfolio, we will take CBS All Access and expand it to be a robust and compelling offering to serve the broad pay streaming segment.”

He elaborated, “This offer will reaffirm and expand the value of entertainment, news and sports content through on demand and live experiences for audiences around the world, built on the foundation of CBS All Access, including the technology, content and subscriber base, adding substantial content assets in film and television, plus the power of world renowned brands to create, in effect, a combined house of brands product.”

He then added CBS All Access would include content from Nickelodeon, Comedy Central, MTV, BET, and Smithsonian as well as a number of their films from Paramount. CBS All Access added Nickelodeon programming such as The Legend of Korra, Danny Phantom and Sam & Cat in January.

Bakish explained, “We will do this at scale to the tune of approximately 30,000 episodes of TV and up to 1,000 movies. This differentiated offering will provide the powerful combination of live linear via over 200 local CBS stations plus on-demand content spanning news, sports, films, drama, reality, kids and more with a global platform and infrastructure from which to market and scale it.”

What do you make of this rumor and Tom White’s financial analysis? Do you think ViacomCBS could be taken over by Netflix, Amazon, or Apple?

More Nick: Nickelodeon Upfront 2020 Roundup!

Additional source: Wikipedia.
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