A below-market bid for Viacom by CBS was immediately rejected, sources familiar with the situation said.
Viacom will now propose a counter offer to CBS. The owner of Nickelodeon and MTV networks believes it deserves a market premium and sees cost synergies of at least $1 billion in the combination, according to sources.
The offer was delivered verbally on Friday, these sources said. The CBS offer is 0.55 shares for each Viacom class B share. Viacom believes a “market price” ratio would be more like 0.62 and the company would like an offer from CBS that values it above that.
As reported by CNBC Tuesday, one point of contention with the deal is the executive slate that will run the combined company. Both sides appear to aggree that CBS CEO Les Moonves should run the entity and he will remain at the company for at least two years. However, Moonves wants to pick his own No. 2 and favors Joe Ianniello, the chief operating officer of CBS. But Viacom and CBS controlling shareholder Shari Redstone favors Viacom CEO Bob Bakish in that role.
On Wednesday, sources said Redstone was committed to Bakish as the No. 2.
Viacom class B shares traded just above $29 a share shortly after the open Wednesday, giving the company a market value of $12.2 billion.The shares fell 4 percent on Tuesday as investors began to learn that CBS made an offer at a price below market value.
At levels CBS is currently trading, the offer rejected Friday would value Viacom shares at around the $28.80 level. But the ratio Viacom apparently wants would value the stock more at $34.59. These prices will change as the stocks fluctuate.
