CBS Likely to Reject Viacom Counter Proposal

No give on price, management issues
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CBS is likely to reject a counter offer made by Viacom as the two companies explore the possibility of combining their business, according to a source close to the situation.

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It was unclear when CBS would send it response to Viacom.

Last late week Viacom, which like CBS is controlled by the family of media mogul Sumner Redstone, sent a letter to CBS asking CBS to raise its offer to 0.68 CBS shares of CBS stock for each Viacom share, from its original offer of 0.55 shares.

The higher price would value Viacom at $14.7 billion, about $2.8 billion about CBS’s initial proposal.

The letter also calls for Viacom CEO Bob Bakish to be the president and chief operating officer of the combined company. Under CBS’s proposal, the job would go to CBS COO Joe Ianniello.

The combination is being pushed by Redstone’s daughter Shari Redstone, who is vice chair of both companies.

CBS has not been in favor of the combination because CBS has been successful as a focused broadcast company while Viacom has struggled as a cable programminger and adding Viacom’s networks could dilute CBS’s ability to drive retransmission consent revenue and built its over-the-top streaming subscription businesses.

Sources say CBS regards its original offer for Viacom as providing a premium to Viacom’s stock price before it began running up amid merger speculation. The merger speculation has also pushed CBS’s stock price lower.

At the same time, in order for the merger to work, the combined company would need a proven management team and CBS would argue that its executive have been successful, while Bakish’s plan to turn around Viacom has yet to bear much fruit.

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It is unclear how well Moonves and Bakish would work together.

Some sources said that Shari Redstone favors adding Bakish to the management mix at the combined company because he owes his job to her and would continue to give her entrée into the companies business and give greater weight to her suggestions, as opposed to management at CBS, which has been seeking assurances that it would be able to operate as independently as possible from its owners.

CBS declined to comment.

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