CBS plans to make an all-stock offer for Viacom that values the U.S. media company below its current market valuation, people familiar with the matter said on Monday, indicating that tough negotiations lie ahead.
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It is unusual for deal negotiations to start with the acquirer valuing its target at a discount.
As part of its initial offer to be submitted in the next few days, CBS CEO Leslie Moonves will propose to stay at the helm for at least two years if the U.S. media company's bid to merge with Viacom is accepted, according to the sources.
That offer is contingent on Viacom accepting all other aspects of CBS's bid, the sources added.
The sources asked not to be identified because the matter is confidential.
CBS and Viacom declined to comment.
Viacom's shares were down 3% in after-hours trading, while CBS shares were little changed. CBS and Viacom have market capitalizations of $19.4 billion and $12.7 billion, respectively.
CBS and Viacom set up special committees to explore the merger in February, a move to reunite the companies split by controlling shareholder Sumner Redstone more than a decade ago.
The two companies explored a merger in 2016 instigated by the Redstone family, but those talks ended unsuccessfully, due to concerns by CBS about price and governance issues.