FBR Capital Downgrades Viacom (VIAB) to Market Perform; Sees Better Risk/Reward in CBS (CBS)
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Barton Crockett commented, "We continue to see a merger with CBS as likely and value-creative. But we believe that a deal would probably happen with either CBS paying a limited premium for Viacom or Viacom buying CBS at a premium, with either scenario probably an exchange of shares. We believe that CBS could argue for meaningful synergies in a merger that could be positive for both equities if a deal is agreed upon. But we also see risk that a merger agreement is not struck, in which CBS would be the less-risky equity to own, based on sturdier fundamentals and stabler management. So to limit downside risk, while retaining upside exposure, we are maintaining CBS as the principal equity we would like to own into the controlling Redstone family's request that both companies consider a recombination."
Shares of Viacom closed at $38.86 yesterday.
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