Sources confirmed to Deadline that Viacom proposed 0.68 CBS shares for each Viacom class B share. CBS had started the negotiations with an offer of 0.55 of its shares for each Viacom class B share.
The counter-proposal was delivered in the middle of last week, sources said, but just came to light a few hours ago via a report by Reuters.
A source close to CBS indicated the company was reviewing the latest proposal, with no timetable for an official response. The companies are both due to report quarterly earnings in early May, so a resolution by then would be advantageous but that deadline is an arbitrary one.
It is the latest turn in the long-running saga of the two media giants, who were under the same corporate roof and are now negotiating a potential re-merger after 12 years apart. National Amusements, built by Sumner Redstone and now run by his daughter, Shari, is the controlling shareholder in both companies. Because each company has independent shareholders and boards, National Amuseuments cannot simply order a merger by fiat.
The two companies, which formed committees earlier this year to explore a re-combination, have not commented officially on the latest reports.
While the prevailing sentiment on Wall Street and in media circles is that the two companies should find a way to get back together, the sticking points remain valuation and management. CBS, which began the process a week ago with an all-stock offer below market value, has stipulated that its CEO, Les Moonves, shape the management team of the combined company. That could leave Viacom CEO Bob Bakish in limbo and favor Joseph Ianniello, COO of CBS, as top lieutenant. Viacom and Shari Redstone have been strong advocates of Bakish, a company vet who has been working to turn things around since taking the CEO reins in December 2016, having a senior role in the new structure.
In a report this morning, MoffettNathanson analyst Michael Nathanson pointed out the challenges that remain.
“Believe it or not, agreeing on a deal price may actually turn out to be easier than figuring out the management structure of the new company,” he wrote.
With at least $750 million in cost synergies and other efficiencies in play, not to mention scale in an increasingly consolidating media landscape, Nathanson suggested some creativity in the management strategy. “Rather than scuttle this accretive deal, we would suggest that both executives remain in a bake-off scenario where Mr. Ianniello has management control over the current CBS assets and Mr. Bakish runs the current Viacom network assets with perhaps Paramount CEO Jim Gianopulos reporting to Mr. Moonves directly,” he continued.
Nathanson went on to describe an “ideal optimization of assets,” with Paramount and CBS TV production groups unifying, along with their international units and a centralized digital group. “To us, this seems like the most practical way to get to an agreement, correctly re-combine the assets, and provide more time to determine the better future steward of the combined company,” Nathanson wrote.
Cowen & Co. analyst Doug Creutz wrote last week that CBS is unlikely to do a deal that destroys value for its shareholders. “The company believes (and we agree) that they are in a position of strength in the evolving television landscape (at least relatively speaking) due to their lack of basic cable networks giving some freedom to operate outside of the basic bundle and their ownership of high-quality content,” Creutz wrote. “Viacom, on the other hand, is operating from a relative position of weakness given its struggling basic cable nets and film studio.
Creutz wrote that even if CBS paid a 10% premium for Viacom it would create value for the networks shareholders,