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CBS and Viacom are actively involved in merger discussions, Advertising Age has learned.

Such a deal would make Viacom the undisputed multimedia powerhouse. It would also be somewhat ironic given that Viacom was created 24 years ago when the Federal Communications Commission's financial interest and syndication rules forced CBS to divest its program ownership and distribution assets.

Nearly 25 years later, that baby Viacom venture, now owned by Chairman Sumner Redstone, has grown into one of the biggest and most vertically integrated multimedia companies around. The only strategic media asset it lacks is a broadcast network.

While Viacom's Paramount unit will launch the United Paramount Network in January, it won't have the clout of CBS.

A CBS spokesman said: "We do not comment on speculation."

But one executive close to the discussions said: "It's certainly happening." He added that the talks could take some time to conclude because of the regulatory and financial details involved.

"Viacom can't do anything until they complete their Blockbuster and TCI deals," he said. "Otherwise, they won't have the cash to do it."

Viacom is in the process of selling its cable TV system assets to an affiliate of cable giant Tele-Communications Inc. The deal would clear the way for a CBS merger by raising cash and removing cable system/TV station cross-ownership legal obstacles.

Blockbuster Entertainment Corp. management is believed to be involved in the CBS talks as well. Blockbuster is awaiting shareholder approval of its merger with Viacom; the merger is expected to be completed soon.

The impetus behind a CBS/Viacom deal is the fact the so-called fin-syn rules end in November 1995.

Viacom executives recently told Electronic Media they're considering the purchase of a broadcast network. Those executives said Viacom will soon have the finan- cial resources to do so, after selling off about $5 billion in non-strategic assets and paying down about half of the $10 billion in debt assumed to acquire Paramount earlier this year.

Another driving force behind the merger would be the common heritage of programming brands. Viacom owns such CBS series as "The Honeymooners," "I Love Lucy" and "Twilight Zone."

The coming end of the fin-syn rules has effectively put all the Big 3 networks into play, with studios such as Walt Disney Co. said to be eyeing all three. Also, Electronic Media reports TCI is talking to NBC parent General Electric Co.

In addition, NBC has been talking to Time Warner, ITT Corp. and others, but at least one knowledgeable executive believes Turner Broadcasting System Chairman Ted Turner is still in the picture.

"Unless ITT is working with somebody like Ted Turner, it wouldn't make any sense for them to acquire NBC. Otherwise, they would just end up being an investor like GE. Whoever buys NBC will have a strategic interest in it," he said. ITT has denied it's trying to buy NBC.

A primary stumbling block in all the discussions is how to value the NBC network and its TV stations to take into account the cyclical highs and lows of the broadcast business, EM reported.

GE was reported to be holding out for a hefty premium based on the improving fortunes of NBC and the broadcast business in general.

Conversely, some close to the company told Electronic Media that GE may want to retain ownership of all or part of NBC and therefore prefer the co-partnership arrangement being discussed with Time Warner.

However, more tight-fisted buyers such as Disney, which generally has opted for less costly and less risky strategic partnerships and internal growth opportunities, are flinching at GE's asking price.

Last week, Electronic Media said Disney officials were weighing at least a $4.5 billion offer for NBC, which far exceeds NBC's $3.6 billion book value and the amount that Disney indicated earlier his year it was willing to pay for CBS.

GE figures NBC's network, TV station group and cable program operations are collectively worth more than $5 billion.

Meanwhile, Capital Cities/ABC for now appears to be under less pressure to pursue a merger deal than it has been.

On Sept. 20, Cap Cities/ABC will name Robert Iger, 43, president-chief operating officer from exec VP and president of the ABC Television Network Group. David Westin, 42, senior VP of Cap Cities/ABC and president of production at the network TV group, is expected to succeed Mr. Iger.

The move has taken the company longer than anticipated because senior Cap Cities/ABC management was reluctant to turn over company reins to the next generation too soon. Mr. Iger is 43.

Some company executives and outside observers had believed Cap Cities/ABC officials were delaying a management succession while they put together a merger deal.

Officially, Cap Cities/ABC has indicated it's positioned to remain a standalone company and, in fact, may look to acquire companies with some $8 billion in potential acquisition funds.

But a knowledgeable media executive said: "I do think that eventually they will align with a studio as will all of the networks. The fact is there were no immediate options available to them, and they need to set their management succession in place. And Bob Iger has developed the confidence of the board and the rest of the senior management."

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