UPDATED with additional details: Viacom has rejected CBS’ initial acquisition offer, and is preparing a counter-proposal that sources say could come as early as today or tomorrow.

CBS’ initial offer valued Viacom’s at below its market value of $12.4 billion, say people familiar with the matter. Reuters reported that the network proposed an all-stock transaction that would exchange of .55 CBS shares for every share of Viacom stock.

Viacom is expected to address both valuation and leadership of the merged companies in its counter-proposal. The last round of merger talks in 2016 fell apart on just this issue: the parties couldn’t agree on a valuation for Viacom.

Leadership of the merged companies has become another obstacle in negotiations. The initial offer to Viacom proposed installing CBS Chief Executive Leslie Moonves at the helm of the merged company for at least two years, with Chief Operating Officer Joseph Ianniello as his No. 2.

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That’s a snub of Viacom CEO Bob Bakish, who’s been attempting to effect a turnaround and has won points in some quarters for being a welcome change from predecessor Philippe Dauman.

Shari Redstone, whose family controls CBS and Viacom through the National Amusements holding company, has indicated she wants was executives from both companies to run the combined entity, and that she won’t support a deal that locks Bakish out of the executive suites.

The companies hope to reach an agreement before May, when they report quarterly results.

Stocks in both companies rose on reports of deal discussions. Viacom’s shares are trading at $30.80 late in the day, up 5% for the day, CBS is at $53.74, up a more modest 2%. As news of the below-market offer surfaced Monday, Viacom shares dropped nearly 2% and then fell even more after hours.

Shari Redstone, who serves as the vice chairman of both companies, has been advocating for the merger. She and her 94-year-old father, Sumner Redstone, have a nearly 80% controlling interest in CBS and Viacom through their holding company National Amusements.

After reports that Shari Redstone had been meeting privately with Moonves and lobbying to bring the two companies back together, CBS and Viacom publicly announced the formation of special committees in February to explore a potential merger.

Moonves, who opposed the merger in 2016, has reportedly pushed for latitude to make decisions as to the management team. Ianniello is seen as a candidate to be top lieutenant in a recombined company.

Wall Street investors have quickly seized on the potential advantages of such a combination, which would bring together CBS’ top-rated broadcast network, with its prime-time lineup and sports programming; the premium cable channel Showtime and Viacom’s two dozen cable channels; plus Paramount Pictures.

Many of those who are bullish on Viacom — or even skeptics who see upside in the deal — say it deserves a premium of between 10%-30% over its current value. Cost synergies from a re-combination, they point out, could total $500 million or more.