2 reasons Time Warner and CBS won't combine

A merger sounds reasonable in theory. A couple of stumbling blocks -- including executive ego -- make it highly unlikely.

By Jonathan Berr Apr 24, 2013 8:20AM
Credit: © Steve Granitz/WireImage
Caption: Sumner RedstoneBloomberg has offered some compelling arguments for why Time Warner (TWX) should buy CBS (CBS). I have two reasons why it may not happen: Sumner Redstone and the book business.

Redstone (pictured), who turns 90 next month, may not be in a mood to sell. The CBS executive chairman's moods, though, are pretty tough to predict. Over the years he has feuded with Mel Karmazin, who left his employ to head Sirius XM (SIRI). Karmazin then quit the satellite radio provider rather than work for mogul John Malone, vowing never to have a boss again because his experience with Redstone was so bad.

Redstone's relations with his children are equally contentious and may flare up again if he ever tries to sell CBS.

Redstone and his daughter, Shari, have clashed over corporate governance issues related to National Amusements, the closely held movie theater chain that controls both CBS and corporate sibling Viacom (VIA). They appear to be on good terms now, but when a $30 billion-plus acquisition enters the mix, all bets may be off.

Redstone's son, Brent, filed suit in 2006 in an effort to break up the media empire that his father spent decades building. Among the accusations he leveled at dad was that Sumner reportedly favored Shari over him. The case was settled a year later after National Amusements agreed to buy out Brent's share of the company, said to be worth more than $1 billion.

The other problem with this theoretical merger is CBS' Simon & Schuster book business. New York-based Time Warner sold the Time Warner Book Group in 2006 to France's Lagardere for $537.5 million, so odds are strong that it wouldn't want to get back into that business. CBS' book unit, which generated a tiny $89 million in profit in 2012, could be sold, but that would add an extra hassle for Time Warner.

Still, Time Warner and CBS would be good together, as Bloomberg suggests, because the combo could offer a lineup of CNN, HBO, the CBS broadcast network and Showtime that would be compelling to both advertisers and TV providers. Other synergies in combining the companies could no doubt be found.

Of course, making deals happen in the real world, where elements like ego can't be graphed in a pie chart, is much harder than imagining theoretical mergers.

Jonathan Berr owns a small stake in CBS. Follow him on Twitter @jdberr.

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