Viacom Inc., the corporate parent of MTV and Nickelodeon, agreed yesterday to buy CBS Corp. in a $38 billion stock deal that would join some of the biggest cable TV networks with the most-watched broadcast network.

The combination would create a single entity capable of reaching television viewers, radio listeners and computer users of every age group, in every corner of the country, as well as around the world. The combined company -- to be called Viacom Inc. -- would be the nation's largest owner of TV stations and of radio stations and would control the nation's largest cable network group and largest billboard company.

As a result, audiences are likely to see a perpetually spinning wheel of cross-promotions: A CBS TV program, for example, might be plugged on one of Viacom's cable networks, such as Nickelodeon or VH1, or could air in reruns on Viacom's Nick at Nite. Viacom-owned Blockbuster Video stores could feature the latest TV movies or popular series from CBS, and CBS's vast network of radio stations could run contests designed to make listeners turn to MTV.

"No other company could serve the audiences, advertisers and investors the way we can," said CBS chief executive Mel Karmazin, who would become president of the combined company.

But others said the vast reach of the new Viacom poses difficult questions in the wake of other media mega-mergers. "The implications of these mergers for journalism and the arts are enormous," said Mark Crispin Miller, a professor of media studies at New York University. "It seems to me that this is, by any definition, an undemocratic development. The media system in a democracy should not be inordinately dominated by a few very powerful interests."

As measured by revenue, the new company, with $18.9 billion in sales, would rank just behind Walt Disney Co. and Time Warner Inc. among the largest entertainment and media conglomerates in the world.

Based on the closing price of Viacom's shares on Friday, the stock portion of the merger was valued at $38.3 billion. Viacom also would assume $2.3 billion in long-term CBS debt, bringing the total value of the deal to $40.6 billion -- making it the third-largest ever in the media business, after AT&T Corp.'s purchases of two cable TV companies in the past 15 months.

Wall Street officials hailed the deal as a coup for Viacom and its 76-year-old chief executive, Sumner Redstone, who would run the company and would maintain voting control over it. Karmazin, 56, would be Redstone's top lieutenant and heir apparent.

The deal must pass several tests among regulators in Washington, though it seems unlikely to be derailed to any substantial degree unless another bidder emerges for CBS.

Among other things, Viacom will probably have to sell or spin off its UPN network to satisfy federal rules preventing a company from owning two broadcast networks. It may also have to cut down the number of TV stations it will own so as to comply with another rule limiting an owner to reaching no more than 35 percent of all households nationwide (CBS and Viacom together reach 41 percent).

Locally, Viacom already owns WDCA (Channel 20) in Washington, and it eventually would have TV stations in 18 of the 20 largest markets. It will also acquire CBS's radio group, which includes WARW-FM, WHFS-FM, WJFK-FM and WPGC AM-FM in the Washington area.

The buyout is a reunion of sorts for the two companies. To satisfy federal rules (since repealed) that prevented TV networks from owning programs, CBS spun Viacom off in 1971 to sell reruns of old CBS programs such as "I Love Lucy" and "The Andy Griffith Show." Under Redstone, whose National Amusements Inc. movie chain bought Viacom in 1986 for $3.4 billion, the company has methodically built itself into a multimedia power, fueled by the enormous profits of MTV and its other cable networks.

Redstone, a former Justice Department lawyer whose first fortune came in the drive-in theater business, will own the majority of Viacom's Class A stock, giving him voting control.

He said yesterday that the agreement was precipitated by Karmazin, a former radio ad salesman who built Infinity Broadcasting Corp. into one of the nation's largest radio station companies. Karmazin broached a deal to Redstone last month after the Federal Communications Commission relaxed some of its rules on TV station ownership. "He seduced us," Redstone said at a news conference in New York. "This man is a master salesman."

Like other large media and entertainment deals, this one was driven by "vertical integration" -- the ability to produce entertainment and simultaneously distribute it.

Viacom has a huge movie and TV studio (Paramount Pictures) but has lacked a major broadcast television network (it owns a half-share of the struggling UPN network).

Conversely, CBS has abundant distribution capabilities (its network and TV and radio stations) but is largely at the mercy of Hollywood studios for its situation comedies and dramas.

"It's an enormously complementary set of businesses and a dynamic set of brands," said Roger Altman, a former deputy Treasury secretary who was CBS's investment adviser on the deal. "If you look at what each side is strong at, they fit together like a hand in a glove."

"As Sumner said, `content is king,' and we believe distribution is king," said Karmazin, who has presided over the CBS network's return to No. 1 in the ratings.

The linking of CBS and Viacom is likely to put pressure on other media companies to strike mergers to achieve greater size and diversity, analysts said yesterday. The most obvious candidate is General Electric Co., the owner of NBC, which would be the only broadcast network without a movie studio and a TV studio within its corporate walls.

Viacom valued CBS at $48.89 per share, based on Friday's prices, but both CBS and Viacom shares rose sharply yesterday. Viacom's stock added 6.5 percent, or $2.62 1/2, to close at $47.93 3/4; CBS closed Tuesday at $50.68 3/4, up $1.75.

Viacom's offer is a few cents less than CBS's closing stock price Friday of $48.93 3/4. CBS stockholders will get 1.085 shares of Viacom Class B stock for each CBS share.

Staff writer Liz Leyden contributed to this report from New York.


Here are what Viacom and CBS bring to their $37.6 billion merger deal:


Movies, TV shows

Paramount Pictures

Paramount Home Video

Paramount Television

Spelling Entertainment

United Paramount

Network (50%)

Cable TV networks


Nickelodeon / Nick at Nite

TV Land


Comedy Central (50%)

Pay movie channels

Showtime (including the Movie Channel)

Broadcast TV stations

WDCA (Channel 20) and 18 other stations

Movie theaters

UCI (joint venture with Universal, about 90 theaters in Asia, Europe and South America)

Famous Players in Canada


Blockbuster (80%)

Simon & Schuster

Theme parks including Paramount Parks (such as Kings Dominion) and King's Entertainment



15 major-market TV stations


Through Infinity Broadcasting Corp. (owns 80%) has 160 outlets, including six of the country's top 10 stations by sales


Nashville Network

Country Music Television


CBS SportsLine

CBS MarketWatch

TV syndication

KingWorld (including "Jeopardy" and "Wheel of Fortune")

Owns pieces of:

"Everybody Loves Raymond"

"Touched by an Angel"

Here is what a combined Viacom-CBS would look like:

Name: Viacom

Based: New York

Employees: 136,000

Chairman and chief executive: Sumner Redstone (now Viacom chairman)

President and chief operating officer: Mel Karmazin (now CBS president and chief executive)

Combined market capitalization: About $68 billion

Terms of the deal: Each share of CBS stock will be traded for 1.085 shares of Viacom's Class B stock (which values CBS at $48.89 per share, based on Friday's closing price).

Yesterday's closing stock prices:

Viacom: $47.93, up $2.62 on the NYSE (ticker VIA)

CBS: $50.68 , up $1.75 on the NYSE (ticker CBS)

Other Big Deals

The Viacom-CBS merger ranks as the third-largest media deal announced to date:



Effective date

Value of deal in billions



March 1999



MediaOne Group

April 1999*






Walt Disney

Capital Cities/ABC

Feb. 1996



Warner Communications

Jan. 1990


*Date of announcement; deal is pending

SOURCE: The companies, Thomson Financial Securities Data, Bloomberg News