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Viacom-CBS Deal Talks Collapse, Redstone Withdraws Proposal

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Shari Redstone withdrew her proposed merger of CBS and Viacom, ending negotiations for a deal that would have recombined her family's media holdings to create a new colossus in the TV industry.

Employees stand in a window next to Viacom Inc.
Employees stand in a window next to Viacom Inc.  Credit: John Taggart/Bloomberg

Ms. Redstone sent a letter to both boards withdrawing the proposal Monday. Viacom interim CEO Bob Bakish will be named the company's permanent leader as the owner of MTV, Nickelodeon and Comedy Central forges ahead as an independent entity, a person familiar with the matter said.

"We know Viacom has tremendous assets that are currently undervalued, and we are confident that with this new strong management team, the value of these assets can be unleashed," Ms. Redstone and her father Sumner Redstone, who controls both companies, said in the letter. "At the same time, CBS continues to perform exceptionally well under Les Moonves, and we have every reason to believe that momentum will continue on a stand-alone basis."

Viacom fell as much as 8% to $35.55, and CBS dropped as much as 5.2% to $59.32.

Merger talks reached a standstill in part because Mr. Moonves only wanted to buy Viacom if he got control over the Redstone family's voting shares, which Shari Redstone wasn't willing to do, said people familiar with the matter, asking not to be identified discussing private information.

Shari Redstone had been pushing for Mr. Moonves to lead a combined CBS-Viacom. Mr. Moonves, who has run CBS since its split from Viacom in 2006, wanted to be in charge of the voting stake as an assurance that he would have the power to run the combined media giant without interference. CBS also realized during deal discussions that it would need to pay a large premium for Viacom, which it didn't want to do, one of the people said.

CNBC reported earlier Monday that Shari Redstone was withdrawing the merger proposal.

Bakish in Charge

Bob Bakish, who took over as Viacom CEO in November, had been running the company as if it would remain independent. Viacom announced a deal to acquire Argentinian broadcaster Telefe the day Mr. Bakish took over. The CEO, who previously ran Viacom's international business, has said foreign markets are one way to reverse the company's recent struggles in the U.S.

While Viacom was viewed as the stronger company after the split in 2006, its performance has flagged in recent years as young viewers watch less live TV and consume more video online. Viewership of Viacom's cable networks has fallen, its movie studio Paramount Pictures lost money in the most recent fiscal year and infighting between leadership and the Redstones prevented the company from reaching a couple of agreements that would have boosted earnings.

"Both the media networks and Paramount have significant structural challenges and neither of those issues will be solved by the merger in itself,'' Ben Mogil, an analyst with Stifel Nicolaus & Co., wrote in a Dec. 6 note.

CBS has weathered changes in media consumption better than Viacom, maintaining its broadcast network's position atop the TV business and improving the performance of Showtime. The company has spun off divisions more reliant on advertising and invested in new online services. Mr. Moonves has portrayed a Viacom deal as interesting but not necessary.

"If it looks right, and is structured properly, it could be an attractive opportunity,'' Mr. Moonves said in November. "If not, we are very excited about our prospects on our own.''

--Bloomberg News

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