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By Keach Hagey and Joe Flint 

National Amusements Inc. is set to call for Viacom Inc. and CBS Corp. to consider a merger, according to people familiar with the matter, a deal that would reunite the Redstone family's media empire but would also require winning over skeptical stakeholders.

National Amusements, which is controlled by Sumner Redstone and has nearly 80% voting stakes in both companies, is preparing a letter it plans to send to the boards as soon as this week, one of the people said.

Such a move would come after Mr. Redstone's daughter, Shari Redstone, rose to power in her father's $40 billion empire after a bruising power struggle that played out this summer. She is president of National Amusements and is set to wield great influence over the family's holdings when Mr. Redstone, who is 93 and ailing, dies.

Reuters had earlier reported that NAI was planning to call on CBS and Viacom to explore a merger.

A CBS-Viacom deal would be a reunion. Viacom acquired CBS in 2000 and the companies split in 2006.

Viacom shares rose 2.1% to $36.22 on the news Wednesday, giving the company a market value of about $14.3 billion. CBS shares rose 1.2% to $52.68, valuing the company at about $23.2 billion.

For Viacom, the deal would come at a moment of great vulnerability, as the company struggles with underperforming assets like its Paramount Pictures studio and a cable networks group that includes MTV and Comedy Central. That has led to a major slide in the company's stock price.

Viacom announced last week that its interim CEO, Tom Dooley, is planning to leave in November.

The company also cut its dividend in half and announced plans to tap debt markets. It has $12 billion in debt and has been under pressure to improve its operating performance. Moody's Investors Service downgraded its credit rating to the lowest level of investment grade.

A merger could potentially provide a strong leader for Viacom in the form of CBS CEO Leslie Moonves, a favorite of media investors.

Ms. Redstone broached the topic of a Viacom merger with Mr. Moonves several months ago, a person familiar with the matter said. However, there have been no serious talks since then or since Philippe Dauman agreed in August to step down as Viacom's chairman and CEO.

Mr. Moonves has previously expressed skepticism about a merger of the companies, and he said at a recent investor conference that there were no active talks between CBS and Viacom.

People close to Viacom and CBS think Mr. Moonves won't be sold on a deal unless CBS is valued at a premium to Viacom and he has the same level of autonomy he currently enjoys at CBS. His contract allows him to leave if he no longer reports to the board or is replaced as chairman.

CBS has been wary of again tying the knot with Viacom at a time when pay-TV providers are seeking to offer their subscribers smaller bundles of channels. At the moment, with a popular broadcast network, CBS feels like it has a strong hand, and worries its leverage with distributors would be weakened if it also had to use its assets to cut deals for Viacom's channels, many of which are in ratings slumps.

At the same time, though, a deal with CBS would give Mr. Moonves, who is known for his programming acumen, a chance to revitalize Viacom's assets. Well-regarded by the creative community, Mr. Moonves might be able to attract strong executive talent to try to resuscitate Viacom's cable operations.

Also, there would be some synergies between the two companies. CBS could use the Viacom channels as a second home for some of its content, something it can't do right now with Showtime or its much smaller CBS Sports Network.

There could also be advantages internationally for CBS as Viacom has been building is presence abroad not only through distributing its programming but also by acquiring or creating its own channels.

Analysts have been running the numbers on a possible merger of the two companies in recent months, frequently coming to the conclusion that under most scenarios a combination will be more beneficial to Viacom shareholders than CBS holders.

For instance, CBS shareholders are only likely to see upside if an all-stock transaction includes synergies of more than $500 million and the combined company is valued at 8.5 times 2017 Ebitda or higher, according to an analysis from Barclays. Minimizing the premium placed on Viacom and selling assets would boost the upside for CBS's minority owners, Barclays analyst Kannan Venkateshwar wrote in a note this week.

CBS shares have fallen more than 9% in the last 2 1/2 months, in part because of speculation that the two media companies would be rejoined.

Write to Keach Hagey at keach.hagey@wsj.com and Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

September 28, 2016 13:32 ET (17:32 GMT)

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