CBS and Viacom could be headed back to the negotiating table in the next few weeks, after reports surfaced that leadership of both companies had earmarked a mid-June deadline for talks.

According to a report by CNBC’s David Faber, CBS’s board of directors decided to initiate the talks after a regularly scheduled board meeting on May 29 in New York. This would be the third time CBS and Viacom have explored recombining the two companies since they split in 2006.

CBS and Viacom declined to comment.

Sources familiar with both companies would neither confirm nor deny that talks were scheduled, saying only that discussions around a possible recombination have been off and on between the two companies for the past three years.

Earlier attempts to get back together in 2016 and 2018 were thwarted by CBS’s reluctance, seeing little benefit in being paired with Viacom’s cable networks and a low valuation of Viacom’s assets. Primary shareholder National Amusements (NAI), headed by Sumner Redstone and his daughter, Viacom and CBS vice chair Shari Redstone, has tried to combine the companies in the past, only to pull back at the last minute.

CBS has undergone its own turmoil in the past year, with the departure of chairman and CEO Les Moonves in September after a lurid sexual-harassment scandal. While long-time executive Joseph Ianniello has stepped in as interim CEO — he renewed his deal though 2019 and CBS ended its search for a permanent CEO in April — many observers believe that Viacom CEO Bob Bakish, a Shari Redstone favorite, will end up running the combined company.

The media climate has changed dramatically since the last two attempts at a merger, with The Walt Disney Co. buying certain 21st Century Fox programming and production assets for $71.3 billion, and AT&T completing its $107.8 billion purchase of Time Warner Inc. Increased scale appears to be the main driver in the industry as traditional linear programmers fight off growing competition from direct-to-consumer, OTT and SVOD service providers.

Viacom has had a particularly hard go of it, getting dropped by Cable One in 2014 and reportedly offering discounted rates to AT&T in its last carriage negotiation with the DirecTV and DirecTV Now parent. A pairing with CBS, which includes the No. 1 broadcast network in total viewers and premium channel Showtime, would likely mean stiffer fees for distributors.

Viacom has made smaller acquisitions over the past year, including ad-supported streaming video service Pluto TV for $340 million in March and, in July 2018, short-form video studio AwesomenessTV for an estimated $50 million. Recombining with CBS’s broadcast network could possibly give Viacom a stronger streaming presence with the CBS All Access service.

Wolfe Research managing director Marci Ryvicker said in a note to clients that she was more excited than ever of the possibility of a recombination of CBS and Viacom, adding that she believes the official announcement of talks could come in “any day/week/minute” and that “most major obstacles [are] behind both companies.”

There are big changes ahead for one of the Big Four broadcasters.

For more than 20 years, CBS Corp. was personified by chairman and CEO Les Moonves, booster of broadcast, programmer par excellence, streaming pioneer and, as it turned out, boardroom brinksman and sexual harasser.

With Moonves forced out by a controlling shareholder and the #MeToo movement, the future of CBS might be more complicated than one of Moonves’s shows, in which the identities of the hero and villain were clear and the plot wrapped up in 60 minutes. (Speaking of 60 Minutes, the executive producer of CBS’s acclaimed newsmagazine was also fired last week. More on that below.)

With a leadership vacuum left behind by a very hands-on chief, the two most likely scenarios involved CBS being merged with Viacom or sold to another owner.

Moonves, one of the highest paid executives in the country, had opposed suggestions by CBS vice chairman Shari Redstone’s that CBS consider a combination with Viacom, also controlled by National Amusements, the family holding company set up by ailing 95-year-old Sumner Redstone.

Taking the Pledge

To fight off the Redstones, CBS attempted to dilute their voting rights. The lawsuit that ensued was settled in an agreement that included the departure of Moonves, new directors being named to the CBS board and a pledge by National Amusements not to suggest a merger with Viacom for two years.

Despite the standstill agreement, there are those who still think that with Moonves gone, a combination with Viacom is inevitable.

BTIG analyst Rich Greenfield noted that while National Amusements agreed not to propose a CBS-Viacom transaction, that doesn’t mean it wouldn’t support one if the two companies’ boards reach terms.

One of the big issues making combining CBS and Viacom difficult was management. Moonves would have been the top dog and he didn’t want Viacom CEO Bob Bakish involved with the new company. With Moonves out of the picture, the Redstones can first pick a new CBS CEO and then decide whether that exec or someone from Viacom would run the companies if they were combined.

The other issue was the price: how many CBS shares would Viacom owners get?

While CBS seemed to think that Viacom’s cable networks were an albatross that would weigh it down, Greenfield thinks the Redstones would be smart to consolidate their media assets.

Weighing a Viacom Deal

“We continue to believe a merger between Viacom and CBS offers substantial value creation in terms of revenue synergies, cost savings and balance-sheet strength; we believe the independent directors will agree,” Greenfield said.

For CBS, there are few alternatives, he added. “We simply do NOT see a buyer for CBS beyond Viacom.”

After hitting a low of $54.04 in early trading Monday (Sept. 10), CBS shares bounced back to close at $55.85 on Friday. Viacom had a roller coaster ride, starting at $29.35 on Monday and trading as low as $28.84 on Wednesday before closing at $29.85 on Friday.

Others think any Viacom deal is dead. Sanford Bernstein media analyst Todd Juenger upgraded CBS stock because the chance of a re-merger with Viacom is “near zero” and the possibility that CBS gets sold has significantly increased.

“The management vacancies, need to cleanse the culture, and the agreement to remove the Redstone Trust provision which impedes an asset sale all make the sale of CBS that much easier and more likely (perhaps even necessary),” Juenger said.

The CBS culture appears to need cleansing because in addition to Moonves, Jeff Fager, the executive producer of 60 Minutes and former chairman of CBS News, was also fired. He too had been charged with misconduct with female staffers, but lost his job when he threatened the CBS reporter who was covering his case that she would be harmed if she wasn’t careful with what she reported.

CBS’s problems made it harder for Viacom to focus Wall Street on Bakish’s pitch that he’s turning the cable programmer around.

During a presentation to an the annual Goldman Sachs Communacopia conference last week, Bakish didn’t mention CBS. But afterwards, he was peppered with questions about CBS by CNBC’s David Faber.

Bakish said it’s “easy to get distracted” by the CBS goings-on, but that he focus was on “delivering a turnaround, delivering an evolution.” He pointed to improvements in distribution revenue, audience share and the financial results at Paramount Pictures. But Viacom’s stock price is capped by the potential of a deal with CBS, Faber noted.

“It’s definitely frustrating,” Bakish said. “We are focused on putting points on the board ... I think we’ll get respect for that.”

MoffettNathanson Research media analyst Michael Nathanson said he expects CBS and Viacom to be talking merger a year from now. With time, CBS’s board will have a better idea of how real Bakish’s turnaround is and how Viacom fared in its critical affiliate-fee negotiation with DirecTV.

CBS stock should be higher in 2019. It has the Super Bowl, the chance to increase retrans fees with 75% of its footprint due for renegotiation over the next two years, and some syndication opportunities.

“At that point, we would expect Viacom and CBS to finally consummate their long-anticipated marriage at terms that are more favorable to CBS than earlier,” Nathanson said.

A Delaware Chancery Court judge ruled against CBS in its quest to keep its largest shareholder from interfering in an upcoming special board of directors meetings, denying the broadcaster’s request for a temporary restraining order.

CBS had filed suit on Monday, claiming that NAI could disrupt the meeting, which was to include a vote to issue a special dividend that would dilute NAI’s voting control of CBS from 80% to 17%. NAI filed its own response and yesterday also amended CBS’s bylaws to require any major issue be approved by a super-majority of directors.

“We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights,” NAI said in a statement. “The court’s ruling today represents a vindication of National Amusements’ right to protect its interests. As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors.”

Heading into the shareholders meeting this afternoon, CBS did not appear disconcerted about the ruling, vowing to continue to fight for shareholders’ interests.

“The judge today found that the allegations in our lawsuit ‘are sufficient to state a colorable claim for breach of fiduciary duty against Ms. Redstone and NAI as CBS’s controlling stockholder.’ We could not agree more," CBS said in a statement. "While we are disappointed that the judge did not grant a TRO, the ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will do so. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

“As previously announced, the CBS Board will hold a meeting at 5 p.m. today to consider declaring a dividend of shares of Class A common stock to all of the Company’s Class A and Class B stockholders, as is permitted under CBS’ charter," CBS continued. "This dividend would more closely align economic and voting interests of CBS stockholders without diluting the economic interests of any stockholder.”