Viacom Rejects CBS Merger Offer

Viacom Rejects CBS Merger Offer

Viacom has rejected CBS’s initial acquisition offer, a source close to the company has confirmed to Deadline.

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The all-stock offer to bring the companies back together was understood to be below Viacom’s market value, which is a departure from the way most acquiring companies typically start the process. CBS has had the better run since the two companies split up in 2006, and merger talks in 2016 fell apart because parties couldn’t agree on a valuation for Viacom.

Viacom’s market capitalization came into the day at $12.4 billion, while CBS is at $19.4 billion.

Management has also proven to be a sticking point. The initial offer to Viacom proposed installing CBS Chief Executive Leslie Moonves at the helm of the merged company for at least two years. It’s unclear where that would leave Viacom CEO Bob Bakish, who’s been attempting to effect a turnaround and has won points in some quarters for being a welcome change from predecessor Philippe Dauman.

The companies hope to reach an agreement before May, when they report quarterly results.

Shares in both companies are up a fraction in early trading today. Viacom is at about $29.65 a share and CBS is at $53.10. As news of the below-market offer surfaced on Monday, Viacom shares dropped nearly 2% and then fell even more after hours.

Shari Redstone, who serves as the vice chairman of both companies, has been advocating for the merger. She and her 94-year-old father, Sumner Redstone, have a nearly 80% controlling interest in CBS and Viacom through their holding company National Amusements.

After reports that Shari Redstone had been meeting privately with Moonves and lobbying to bring the two companies back together, CBS and Viacom publicly announced the formation of special committees in February to explore a potential merger.

Moonves, who opposed the merger in 2016, has reportedly pushed for latitute to make decisions as to the management team. His No. 2, COO Joseph Ianniello, is seen as a candidate to be top lieutenant in a recombined company.

Wall Street investors have quickly seized on the potential advantages of such a combination, which would bring together CBS’ top-rated broadcast network, with its prime-time lineup and sports programming; the premium cable channel Showtime and Viacom’s two dozen cable channels; plus Paramount Pictures. Many of those who are bullish on Viacom — or even skeptics who see upside in the deal — say it deserves a premium of between 10%-30% over its current value. Cost synergies from a re-combination, they point out, could total $500 million or more.