The new company will be called ViacomCBS, and Viacom's CEO, Bob Bakish, will be the CEO of the combined company. Joe Ianiello, who was serving as CBS CEO since last year, will be the chairman of CBS and will be in charge of CBS assets after the merger.
Existing CBS shareholders will own about 61% of the combined company, with Viacom shareholders owning the remaining 39%. Each Viacom shareholder will receive .59625 shares of CBS shares. CBS shares rose 1.5%. Viacom shares rose 1.77%.
The combination reunites the two media companies controlled by Sumner Redstone's National Amusements. Viacom spun off CBS in 2006. Redstone's daughter, Shari, is the vice chairman of the board at both CBS and Viacom and has long desired putting the companies back together to gain scale in a media environment where competitors including Disney, Comcast and AT&T have bulked up through a series of megadeals.
"I am really excited to see these two great companies come together so that they can realize the incredible power of their combined assets," Redstone said in the statement. "My father once said 'content is king,' and never has that been more true than today."
A merger will add movie studio Paramount Pictures, cable networks such as Comedy Central, MTV, Nickelodeon and BET, and other assets including the streaming service Pluto TV and South Park Studios to CBS, which owns the eponymous broadcast network, Showtime, and other assets. The added scale will help ViacomCBS compete with Netflix, Amazon and other legacy media companies on spending. ViacomCBS has spent more than $13 billion in the past 12 months, the companies said in a statement.
CBS and Viacom plan to "accelerate" their streaming strategies and expand globally, according to the statement. The companies have not said if they plan to offer a combined streaming product, such as Warner Media's HBO Max. CBS's CBS All Access and Showtime Anytime already have more than 8 million subscribers combined. Viacom offers niche streaming products such as the $7.99-per-month kids service Noggin.
The companies estimate $500 million in annualized run-rate synergies within 12 to 24 months.
Shari Redstone has advocated for a deal to give a combined company more financial heft to compete against media and tech heavyweights including Amazon and Apple for entertainment and sports rights, most notably the National Football League. CBS owns NFL broadcast rights until 2022 and "will do what is necessary" to renew them, according to CBS Sports chief Sean McManus. Redstone will be the new chair of the combined company.
CBS and Viacom nearly merged a year ago before a rift over who would run the combined company derailed discussions. The boards had agreed upon an exchange ratio of 0.6135 CBS share for every Viacom Class B share at the time. Viacom also scrapped plans to merge with CBS in 2016.
The companies restarted merger talks in earnest this year after CBS replaced six members of its board of directors and its CEO, Les Moonves, in September. Moonves stepped down as chairman and CEO amid sexual misconduct allegations. Discussions have dragged on throughout the year as the new CBS board has become more comfortable with the idea of merging with Viacom rather than pursuing other paths.
Ianniello replaced Moonves as CEO last year and will stay at the combined company in a role where he can help shepherd the integration of CBS assets.
Keeping Ianniello and naming current CBS Chief Financial Officer Christina Spade the CFO of the combined company may help assuage CBS investors that Viacom won't have undue say over the future of the company, sources familiar with the situation said. The CBS board has been concerned with potential shareholder lawsuits about buying Viacom and using the target company's leadership team, according to people familiar with the matter. Some investors may believe CBS chose to merge with Viacom because of pressure from Redstone, who isn't allowed to push for a deal herself as a condition of a settlement with Moonves last year, instead of abiding by its fiduciary duties to all shareholders.
A combined CBS-Viacom deal may close by the end of the year or early next year because of National Amusements' controlling ownership stakes in both companies, people familiar with the matter told CNBC last month. That will allow Redstone and Bakish to focus on the company's next acquisition, which could be Lionsgate (or its premium network Starz) or another media company.
Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.