Tension Mounts During CBS, Viacom Merger Talk

Media mogul Shari Redstone has been the catalyst behind the effort to recombine CBS Corp. and Viacom Inc., and she has grown frustrated by CBS' seemingly strident approach to merger talks, according to The LA Times citing three people familiar with the situation but not authorized to publicly discuss it.

CBS' recent lowball offer for Viacom, and its desire to dictate who would run the combined company, have caused considerable friction, the people said.

All this matters because Redstone and her family control nearly 80% of the voting stock of both companies through their investment vehicle, National Amusements Inc. Redstone believes Viacom and CBS would be stronger together as they and other traditional media companies face huge challenges adapting their businesses to compete against titans of technology — Alphabet Inc., Facebook Inc., Netflix Inc. and Amazon.com Inc.

Shari Redstone

Viacom on Wednesday rejected CBS' offer of 0.55 of one of its shares per class B share of Viacom stock, the sources said. Viacom's special committee overseeing the merger talks was planning to make a counteroffer to CBS late Wednesday or Thursday.

Beyond price, the sticking point is which executives would be on the senior management team of the combined entity. CBS has stipulated that its chairman and chief executive, Leslie Moonves, would run a merged CBS-Viacom for at least two years and that Moonves' second-in-command, Joseph Ianniello, CBS' chief operating officer, would continue in that role.

Redstone, however, wants Viacom CEO Bob Bakish to have a prominent role in the mix and had hoped the two teams would form a collaborative relationship, according to a person familiar with her thinking.

CBS does not view its bid for Viacom as unfairly low.

CBS "believes that they are in a position of strength in the evolving television landscape 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," Cowen & Co. media analyst Doug Creutz said in a report Wednesday. "Viacom, on the other hand, is operating from a relative position of weakness."

Viacom's networks have struggled in the ratings, its movie studio loses money and its stock fell to about $25 a share as recently as last fall before regaining some ground.