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The CBS-Viacom Merger: I’m at the Top of My Game

3 minute read
Daniel Kadlec

Sumner Redstone has done his last big deal. Probably. This year anyway. Oh, heck, at least before our next issue hits the stands. That seems safe. He keeps saying he’s done, hedging ever so slightly, and then proving himself wrong. It’s either a rare lapse of vision for this self-made billionaire or the grandest ongoing head fake in the entertainment industry.

“Am I done now?” he asks rhetorically. “I can’t see any deal on the horizon that approaches the implications for future growth at Viacom [that the] CBS [deal does]. But, of course, nothing is certain.” That’s the same basic message that Redstone, Viacom’s CEO and controlling shareholder, delivered in the wake of his $10 billion acquisition of Paramount Communications in 1994–a stunning deal in its day, one that kept Redstone busy for the next four years selling pieces of Martin Davis’ empire to pay down a heaping pile of debt. Last year, when I spoke with Redstone for a book I was writing, he reiterated his view that the entertainment world had consolidated about as much as it would for a while.

Then he goes and plunks down $36 bil for CBS. What changed? Better to ask what didn’t change, and the answer is that at age 76, Redstone, whose heart rate is lower than that of many pro athletes, remains a driven dealmaker obsessed with staying ahead of the pack. CBS chief Mel Karmazin may have “seduced” Redstone into this merger, as both sides note. But Redstone was looking for love. He almost always is.

Redstone hails from tenements on Boston’s west side. His father was a small-time entrepreneur who opened one of the first drive-in theaters in the country in the 1930s. Redstone had the same scrappiness and a Harvard education, and turned a drive-in into a bustling movie-house company called National Amusements, which grew to 1,200 theaters. He is often credited with inventing the concept of the multiplex. Something of a late bloomer, Redstone didn’t hit the big time until 1987, when at age 64 he put virtually all the assets of his company at risk in a bidding war that won Viacom, then a cable company, for $3.4 billion. Ironically, Viacom had been split off from CBS 16 years earlier as a syndicator of TV shows and movies.

Redstone has always taken big risks. The Paramount bidding went $2 billion higher than his target, but he spent the money anyway. He now says he’d never burden Viacom like that again and notes that the CBS deal, a stock swap, was done without paying a premium or adding debt.

And CBS has Karmazin, a shareholder-first kind of guy, like Redstone–and one reason Redstone could dump his own team. He praises Karmazin’s “easy, nonarrogant” style and bristles at the notion that he can’t work with a strong No. 2. “There’s only one time it didn’t work out,” he says, referring to former heir apparent Frank Biondi.

That doesn’t mean Karmazin will necessarily get Redstone’s job down the line. “This was not a decision on succession,” Redstone says, making it clear that with a majority of Viacom’s voting stock and a personal stake in the company worth $9.3 billion, he remains firmly in charge. “I love what I’m doing. I really think I’m at the top of my game.” If you’re Karmazin eyeing the corner office, that should give you pause. And if you’re a media company, it’s probably time to stop going for that head fake.

–By Daniel Kadlec

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