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CBS, Viacom See Internet Growth in Blockbuster Merger

Media giants CBS Corp. and Viacom Inc. Tuesday announced they were merging in a blockbuster $34.86 billion deal that will bring a growing number of Internet properties together with television and film assets.

CBS (CBS) shareholders will receive 1.085 Viacom (VIA) Class B shares for each share they own. The deal values CBS at $48.89 a share, slightly below its closing price on Friday.

The new company will be known as Viacom and will be headed by Viacom Chairman Sumner Redstone. CBS Chief Executive Officer Mel Karmazin will become president and chief operating officer.

The deal, which is expected to close in the first half of next year, must still be approved by CBS shareholders.

Among the Internet properties that will be folded into the new Viacom are SportsLine.com, CBS MarketWatch, MTV.com, SonicNet, VH1.com and Nick.com.

Karmazin sees a number of opportunities to expand the company's Internet growth.

"We have been dynamically expanding in new media for the past year or so, adding the CBS brand to some of the most visible sites on the Web in financial news, sports, entertainment and e-commerce, among others. Viacom has its own growing Internet presence in a variety of successful Web sites which will join our growing portfolio of Internet concerns.

"The powerful brands of our two companies... will enable us to establish and maintain the most dynamic and visible Internet strategy in the media business," he said.

Speaking at a news conference, Karmazin said the merger will pay off big for the companies' Internet properties as it will give them a promotional boost which should increase traffic. CBS' and Viacom's traditional media properties will also benefit from additional promotional spending by other companies wishing to market their Internet efforts, he said.

Redstone said while the specifics of how CBS and Viacom Internet assets will be affected remain to be determined, everyone at both companies believes in the Internet and believes it has huge potential going forward.

"We've already told the financial community that for us the Internet is not an add on, but a major growth business. That business becomes enhanced when you marry our Internet strategy with CBS'," he said.

CBS has recently taken stakes in a number of Internet plays, including online directory Switchboard Inc. and Baby Boomer-oriented Third Age Media Inc..

Earlier this summer, the company was reported to be planning to launch a new Web portal that would anchor its growing list of Internet properties.