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Seeking Agreement between Viacom and CBS

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May. 11 2018, Updated 2:18 a.m. ET

Viacom termed the offer insufficient

An ongoing disagreement appears to be holding up a deal between CBS Corporation (CBS) and Viacom (VIA) (VIAB), the media companies controlled by the Redstone family. In early April, CBS offered to acquire Viacom and wanted its executive team to run the combined company. Viacom rejected the offer, terming it insufficient.

Firstly, the offer that CBS placed on the table valued Viacom below its market capitalization. The issue of sharing leadership positions has developed into a major sticking point in the effort to merge CBS and Viacom. While CBS outlined a leadership team that excludes Viacom executives, Viacom is fighting for a senior role for its chief executive offer, Bob Bakish, in the combined company.

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Bakish steered Viacom to more than 6.4% revenue growth

Bakish was confirmed as Viacom’s CEO in December 2016. He led the company to post revenue growth of 6.4% to $13.3 billion in the fiscal year ended September 2017. CBS posted revenue growth of ~3.8% in its comparable fiscal year.

A merger could unlock cost benefits

Despite the disagreement over leadership and price, CBS and Viacom agree on the strategic merits of a merger, according to a Wall Street Journal report. Viacom, for instance, sees $1.0 billion in potential synergies in a merger with CBS.

Perhaps by pooling resources, CBS and Viacom could better respond to digital disruption. For example, households are dropping traditional television bundles for cheaper online video entertainment plans offered by companies such as Netflix (NFLX), Amazon (AMZN), and Alphabet’s (GOOGL) Google through its YouTube division.

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