Paramount Question: Viacom, CBS Edge Closer As Alibaba, Amblin Team Up

Viacom (VIAB) has reportedly hired Morgan Stanley (MS) to explore a CBS (CBS) merger, as Alibaba (BABA) -- once rumored to be interested in Viacom's studio arm — ties up with Amblin instead.

The MTV and Comedy Central parent hired the bank and will also bring on a second financial advisor, said the Wall Street Journal late Friday, citing people familiar with the matter. The outlet's sources said that CBS, which is currently retaining Lazard, might also hire more financial and legal advisors.

The move follows Sumner Redstone's National Amusements publicly calling on both companies late last month to consider an all-stock combination. National Amusements controls about 80% of both Viacom and CBS' voting shares.

Meanwhile, Alibaba's studio arm and Steven Spielberg's Amblin Partners said Saturday that they will coproduce and finance movies for global and Chinese audiences, with Alibaba Pictures acquiring a minority equity stake in Amblin Partners. Amblin will also welcome an Alibaba representative to its board of directors.

Amid the wheeling and dealing, the fate of Paramount Pictures, which could be a key sticking point in any Viacom-CBS merger, remains unclear.

Earlier in the summer, Alibaba's Jack Ma and Viacom's Shari Redstone reportedly met up to discuss a potential sale of the media conglomerate's studio arm, according to the New York Post. But The Street, citing people close to the issue, later said that Alibaba preferred licensing deals with the studio over part or full ownership.

Shares of Viacom were up 1% at 36.63 in the stock market today. CBS climbed 1.5% to 56.06, closing in on a 58.32 buy point from a cup base.

IBD's TAKE: Despite getting a bit of a boost from the CBS chatter, Viacom's stock has nevertheless been trading below its key 50-day and 200-day moving averages since late August. Keeping an eye on moving averages is key for investors: "Law Of Averages: Sell When Stocks Breach 200-Day Line."

China-based firms have been eyeing Hollywood with increased interest.

Alibaba has invested in Paramount Pictures films "Star Trek Beyond," "Teenage Mutant Ninja Turtles: Out of the Shadows," and "Mission: Impossible - Rogue Nation."

And in July, Viacom was said to be in talks to sell a 49% stake of Paramount to AMC (AMC) theaters parent Dalian Wanda Group.

Alibaba rose 2.1% Monday. Shares broke out in August and are now in profit-taking sell territory. AMC edged up 0.5%.


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