Sticking Points Emerge In Viacom, CBS Deal Talks

(Reuters) -- Possible sticking points have emerged ahead of negotiations between media companies CBS Corp and Viacom Inc about a potential merger, including who will be on the board of the combined company and what it would be called, people familiar with the situation told Reuters.

Sumner Redstone and his daughter Shari Redstone, who own the majority of voting shares of both Viacom and CBS through their privately-held movie theater company National Amusements Inc, are pushing to recombine the two companies 10 years after they split from each other.

Sumner, Shari Redstone

Each company has set up a special committee of directors to explore a potential merger and have hired bankers as advisers. Discussions are still in the early stages and bigger issues loom, including price and how the deal would be structured, the sources said.

Many investors and observers believe a deal could be announced as soon as by the end of the year and that CBS Chief Executive Leslie Moonves will run the combined company.

Governance issues are a potential source of tension, though. Shari Redstone wants to keep the five National Amusements directors she handpicked for Viacom's board if it merges with CBS, the sources said.

National Amusements replaced former Viacom CEO Philippe Dauman and four other directors on Viacom's board last spring as part of a battle to maintain control over the owner of MTV, Comedy Central and other cable networks.

It is unclear if Moonves and CBS's board would push back, but they do want to make sure Moonves has autonomy over the combined company. A compromise could involve setting up a larger board.

Les Moonves

There is also a question over the combined company's name, although no talks on the issue have been held. Moonves and the company's board want the CBS name to remain, while the Redstones want to ensure the Viacom name lives on, said the sources, who wished to remain anonymous because they are not permitted to speak to the media.

For the 93-year-old Redstone, who was CEO of Viacom from 1996 to 2006 and executive chair of both Viacom and CBS until last year, preserving the Viacom name is part of his legacy, the sources said.

"Viacom is me, and I am Viacom," Sumner Redstone told Fortune magazine in 1999.

CBS executives believe their brand is more powerful, the sources said. Viacom has been struggling to turn around declining ratings and sinking ad revenue, while CBS has been a steady performer. So far this year, CBS' shares are up 26 percent while Viacom's shares are down 6.5 percent.

During the CBS earnings call earlier this month, Moonves said explorations were still in the early stages, adding that "if it looks right and is structured properly, it could be an attractive opportunity."