CBS plans to make an all-stock offer for Viacom that would value Viacom at less than its current market capitalization, according to a report from Reuters that cites people familiar with the matter.
CBS and Viacom are controlled by the family of media mogul Sumner Redstone, whose daughter Shari Redstone, vice chair of both companies, has encouraged their boards to consider a combination.
CBS’s low-ball bid signals that it thinks it is the more powerful and valuable company. It would also signal that difficult negotiations are ahead.
The two companies has been combined but were split by Sumner Redstone more than 10 years ago. The two companies considered a combination in 2016.
John Janedis, analyst at Jefferies, said that a recombination of CBS and Viacom faces hurdles, with price and leadership among the key issues.
Janedis notes that similar issues, including governance and management autonomy were issues the last time the companies considered a combination.
“A theme that looms larger this time around is likely carriage for the combined company's networks and any potential dis-synergies,” he said in a note Monday.
“The challenges on the traditional media distribution models are all very real, though the solutions outside of scale don't necessarily guarantee successful outcomes,” Janedis said. “Assuming press reports are accurate, a take-under would make it very difficult to consummate a deal, in our view. It will be interesting to see to what extent a stalemate could translate to other potential bidders for either asset.”