Shari Redstone has taken control at Viacom Inc. after vanquishing challengers. Now comes the hard part: deciding what to do with all that power.
The daughter of 93-year-old billionaire Sumner Redstone, whose frail health ignited the power struggle in which she triumphed, is considering recombining Viacom with CBS Corp., according to people familiar with the matter. Such a move would reunite the two pillars of the Redstone family's media empire, though CBS shareholders may blanch at the idea of taking on Viacom's struggling cable networks and movie studio.
CBS, whose CEO Leslie Moonves has been on good terms with the Redstones, hasn't received any indication that a deal is imminent, according to a person familiar with the matter; its board would need to support any transaction. CBS declined to comment and Shari Redstone, who serves as vice chair of both companies, didn't respond to a request for comment. A CBS merger is just one of many decisions the Redstones will consider, including how to boost the ratings of Viacom networks and whether its creative leaders are the right ones.
The Redstone family settled a three-state legal dispute with former CEO Philippe Dauman and board member George Abrams earlier this month, securing Mr. Dauman's exit and allowing people backed by Shari Redstone to join the board in key positions. Another legal matter was put to rest last week, when Keryn Redstone, Ms. Redstone's niece, dropped her opposition to the settlement in exchange for assurances that she would be treated equally in her grandfather's trust.
The closing of that sideshow was one of the steps Shari Redstone needed to ensure she could direct the future of her father's holdings before and after his death. Throughout this year's legal battle, she has said her views on Viacom are aligned with her father's. She is quickly making her voice heard at Viacom, picking winners and losers after the revolution.
In the past week, Viacom's longtime head of corporate communications, Carl Folta, departed. Ms. Redstone, interim CEO Tom Dooley and the Viacom board, meanwhile, showed support for Paramount Pictures chief Brad Grey.
A 62-year-old lawyer by training, Ms. Redstone runs a venture capital firm as well as National Amusements Inc., the Massachusetts-based theater chain that was the original source of the family's wealth. A presence in the Viacom boardroom for years, she shares an opinionated streak with her father. It looked as though Ms. Redstone might lose control earlier this year after Mr. Dauman was named chairman of the company over her objections.
"Shari has done a masterful job re-asserting herself at Viacom," said Paul Sweeney, a Bloomberg Intelligence analyst. "Les's main strength is programming. Viacom is in dire need of improved programming at both its cable networks and its Paramount film studio."
CBS and Viacom split in 2006 in a deal that was supposed to let the high-flying cable networks operate unencumbered by the slow, steady broadcast business.
But industry upheaval and strategic missteps have led to falling ratings for some of Viacom's most important cable channels, such as MTV and Comedy Central, while its film unit, Paramount Pictures, has been mired in last place among the major studios, with bombs such as this year's "Whiskey Tango Foxtrot," "Zoolander 2" and "Ben-Hur."
CBS, under Mr. Moonves, has been the most-watched broadcast network 13 of the last 14 years, and its Showtime cable channel has also drawn more viewers with hits such as "Homeland." Now it is CBS that could be dragged down by Viacom's slower growth, with more viewers shutting off cable altogether in favor of streaming video such as Netflix and YouTube.
Viacom would give CBS a broader portfolio of networks and give Mr. Moonves a rare opportunity to own a major Hollywood studio, which could make it easier to create and acquire programming. All of CBS's major broadcast rivals -- ABC, NBC and Fox -- are part of corporations that include top film studios.
"The programmers need to consolidate," said Sal Muoio, a New York-based money manager with 242,000 Viacom shares. "There could be a big deal, probably involving Viacom."
Mr. Moonves, with his record of success, would be the natural pick to run the combined company. Ms. Redstone has warmed to Mr. Dooley, despite his many years working alongside Mr. Dauman, people familiar with the matter said. But he remains CEO on only an interim basis until the board decides at the end of September whether to make him Viacom's permanent leader.
Shareholders would be better off selling the company to the outside buyer than effecting a merger of equals with CBS, said Mr. Muoio, who considers Viacom "worth over $100 a share." That's more than twice Friday's closing price of $41.11.
The reach of CBS's broadcast network and its sports programming would be key to helping Viacom negotiate better terms from pay-TV distributors, according to Matt Harrigan, an analyst with Wunderlich Securities.
"That certainly makes the most sense in the long term," he said.