(Bloomberg) -- CBS Corp. and Viacom Inc. may be done keeping investors waiting.
The media giants are expected to announce a merger as soon as Tuesday, the culmination of years of on-again, off-again discussions.
They’ve agreed on an exchange ratio of 0.59625 a share of CBS for each of Viacom’s for the all-stock merger, according to people familiar with the situation. At this level, a deal would peg Viacom at around its current market value of close to $12 billion. The agreement struck between the companies is in principle and won’t be final until it’s announced, the people said.
The companies have been negotiating around the clock since the weekend and the timing of an announcement could still change, according to the people. The current trading ratio between the two companies is around 0.59, based on their stock prices as of the close on Monday.
CBS shares gained 0.8% to $48.41 as of 9:40 a.m. in New York on Tuesday, while Viacom rose 0.3% to $28.62.
The last time the companies were in merger discussions, more than a year ago, Viacom directors had agreed to take 0.6135 of a CBS share for every nonvoting share of their business, people with knowledge said at the time.
The companies now expect about $500 million of annual cost savings from the deal after Viacom took about $300 million in costs out of its business, one of the people said. The two sides, using the code names “Comet” and “Venus,” had earlier expected to save at least $1 billion by combining.
Shari Redstone, whose family investment vehicle National Amusements Inc. controls both companies, would become chairman of the combined entity, the people said. Viacom Chief Executive Officer Bob Bakish, meanwhile, is set to lead the company as CEO, according to the people. He would also get a seat on the board.
The deal would unite the most-watched U.S. broadcast network with the owner of the Paramount movie studio and cable channels such as MTV and Nickelodeon. It would also cap years of failed merger attempts and board infighting at both companies.
The companies are likely to highlight how greater scale will help them negotiate with third parties, MoffettNathanson analysts said in a note to clients on Friday.
“CBS’s and Paramount’s production asset will quickly move up the ranks to challenge the big boys of Disney, Comcast, AT&T and Netflix, and will be an attractive home for creative talent,” they said.
CBS would receive six seats on the 13-member board, while Viacom would get four, the people said. Another two would be designated to NAI, they said, with Redstone and family attorney Robert Klieger slated for those roles.
Strauss Zelnick, the video-game executive who is the interim CBS chairman, has stated that he’s not interested in an ongoing role. The Information reported on the likely board composition last week.
Viacom had a market value of about $11.7 billion as of Monday’s close.
CBS and Viacom, both based in New York, were one entity until 2006, when the Redstone family decided investors would give them greater value as separate companies. That strategy didn’t work as well as expected, and there’s been sporadic efforts to recombine them in recent years.
CBS has been weighing its next moves since the ouster of longtime CEO Les Moonves last year. He was fired in September after a dozen women accused him of sexual misconduct, setting off a shake-up that included a board overhaul. Joe Ianniello, formerly chief operating officer, has been running the company as interim CEO ever since.
(Updates shares in fifth paragraph)
--With assistance from Jeff Green and Gerry Smith.
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