The CBS-Viacom reunion dance continues unabated with Reuters and CNBC reporting on Monday that Viacom (VIAB) countered the opening offer from CBS (CBS) by asking for a $2.8 billion sweetener and the number-two role for Viacom CEO Bob Bakish. A story from The Los Angeles Times reported that CBS will reject the counteroffer with no details on a revised offer from CBS. As we noted previously, the deal is being negotiated by the special committees for both companies, which appear to have much different thoughts around valuation, management composition, and the potential synergies from a recombination. While we still think a deal is slightly more likely than not to occur because of the insistence of Shari Redstone, we believe that the CBS board members on the special committee have left themselves with a credible path to reject a deal. We also venture that the objections to paying a premium to Viacom's current share price and preferring the CBS management team reflect the beliefs of many CBS shareholders (excluding National Amusements. We are maintaining our narrow-moat ratings for both firms along with our fair value estimates of $71 for CBS and $35 for Viacom.
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