No Change to Our CBS View as Moonves Is Pushed Out

CBS also revealed that Les Moonves has departed as chairman and CEO and will be replaced as CEO on an interim basis by current COO Joseph Ianniello. The board did not buy out the severance clause in Moonves' contract, as previously rumored. Instead, any future severance payments will depend on the outcome of the independent investigation into the allegations of sexual assault and misconduct made by several women in August. The two concurrent but separate moves by the board place the long-running drama between CBS and its controlling shareholder on hold for the near future. We retain our narrow moat rating and our $71 fair value estimate. With the stock trading in 4-star territory and the removal of two of the major overhangs on the firm, shares may offer an attractive entry point for investors.

The settlement with National Amusements covered much of what was rumored and expected, as we outlined in our Sept. 6 note, "More Plot Twists at CBS: Board in Talks to Settle With Redstones and Ease Out Moonves." The two sides dropped their lawsuits and reversed both the special dividend declaration and the rule change regarding the requirement of a 90% supermajority to pass a special dividend. The potential for a forced merger with Viacom is deferred for two years. However, the board did not win the right to shop CBS to potential buyers as part of the settlement, implying that Shari Redstone will attempt to recombine CBS and its sister firm in two years unless the restructuring plan at Viacom fails and makes a merger of equals even more untenable than it was last year.

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