Time Warner Inc (TWX) & CBS Corporation (CBS): Is A Mega-Merger Possible?

Most recently, Comcast Corporation (NASDAQ:CMCSA) and NBC Universal came together in a combination that combined delivery and content development. That merger has seen a few bumps, but nothing that’s not going to be overcome. Comcast Corporation (NASDAQ:CMCSA) is still suffering from lower earnings with an EPS of $2.28, and its P/E of 17.77 is in the middle of the pack.  Going forward, the combination of content and distribution – which CBS Corporation (NYSE:CBS) and Time Warner Inc (NYSE:TWX) may be hoping to profit from – is already at work here for Comcast Corporation (NASDAQ:CMCSA).  The learning curve is mostly past for these two and things should be picking up soon.

The granddaddy of these plays, however, is The Walt Disney Company (NYSE:DIS). The Walt Disney Company (NYSE:DIS) bought ABC – along with ESPN and a bunch of other properties – in 1996 and has since combined its broadcast arm with top content makers such as Pixar, Marvel and now LucasFilm to create a media behemoth that will be hard for anyone to challenge. Now that the company is committed to streaming with Netflix, Inc. (NASDAQ:NFLX) beginning in 2016, it’s also lining up a new media vision. Share price appreciation of 45.36% over the last 12 months and EPS of $3.09 – higher than almost all of its competitors – along with a 14.60% net margin demonstrate the benefits of combining distribution and content.

Moving forward

It’s not that the idea of CBS and Time Warner merging is locked in stone, it’s just that it makes sense. Both companies are at a competitive disadvantage right now and seem to make sense for each other. Whether their respective boards can acknowledge that fact and work towards a marriage is something only time can tell. For us investors, it might be productive to pick up some shares of both companies prior to any serious discussions getting underway. Even talks would boost both share prices, allowing for some quick profits to be made. If they agree on a deal, there’ll be more.

The article Time Warner and CBS: Could They Combine to Create a Titan? originally appeared on Fool.com and is written by Nate Wooley.

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