Time Warner, CBS Seen as Candidates for Merger: Real M&A

Time Warner Inc. (TWX) and CBS Corp. (CBS) have flirted for years. A marriage now may make more sense than ever.

CBS shares, while trading near thehighest price since the company andViacom Inc. (VIAB) split seven years ago, fetch the lowest valuation versus earnings when compared with its five largest U.S. peers, according to data compiled by Bloomberg. Gabelli & Co. said buying the most-watched broadcast network would give Time Warner, owner of cable channels such as CNN and TNT, more negotiating leverage to win higher fees from pay-television systems that carry its programming.

A merger “makes a lot of sense,” Michael Morris, a Richmond, Virginia-based analyst at Davenport & Co., said in a telephone interview. “With the amount of collaboration they do, investors see it as a possibility as well.”

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