Finally Some Adult Behavior From CBS

By Anonymous

CBS seems to be wising up and extracting itself from its complex web of messes. These include a legal dispute with its controlling shareholder, National Amusements, over control of the media company; an attempted coup against said controlling shareholder; and allegations of sexual misconduct against Chief Executive Les Moonves.

CBS and National Amusements are now in talks to settle the lawsuit, which is supposed to go to trial in Delaware next month. A settlement would reportedly include CBS dropping its attempted coup—the move to strip National Amusements of its voting control of CBS by issuing shares as a dividend. In exchange, National Amusements would refrain from forcing a merger of CBS and Viacom VIAB -0.61% for a period.

That agreement seems reasonable. Avoiding a drawn-out and bitter legal battle is in the best interests of everyone. It means the companies can start to move forward, even if it isn’t in the direction of immediate CBS-Viacom consolidation. CBS shares were up 3% Thursday afternoon, while Viacom was flat.

One step forward for CBS involves dealing with Les Moonves, who is being investigated by two independent law firms, and whose opposition to the merger with Viacom seems to have sparked much of the nastiness with National Amusements. Board members are negotiating a possible exit for him.

The question for investors is where CBS and Viacom go from here. Free of legal entanglements, both will now have the chance to pursue other mergers. Doing so may prove trickier for CBS than for Viacom, though CBS has the more coveted content. Federal Communications Commission rules effectively prohibit a merger of broadcast networks, which means CBS can’t be snapped up by Comcast , which owns NBC, or by Disney , which owns ABC. Once high tempers come down and Mr. Moonves is gone, CBS may find that its best option is to merge with Viacom after all.

Meanwhile, what of CBS in Moonves’s absence? He has been hailed as a media genius, the man who made CBS America’s most-watched network. The same was said about Steve Wynn, the casino genius behind Wynn Resorts who resigned amid allegations of sexual misconduct, but the company has done fine without him.

The biggest surprise in these two deals may be the awakening of CBS’s board, which has been beholden to Mr. Moonves. It could cost the company $100 million to get rid of its CEO, and the board itself may be tossed out soon after. But a CBS with a fresh board and new management might be rewarded by investors, even without a deal.