For Viacom, CBS is not going to lend a helping hand

New York: Viacom is going it alone. The troubled media company named Robert M. Bakish its new chief executive just hours after it received marching orders to stop exploring a combination with CBS.

In a letter to the CBS and Viacom boards, Shari Redstone and her father, Sumner Redstone, who built the $40 billion (Dh146 billion) media empire, said the two companies should continue on independent paths “based on our assessment of the strengths, progress, and future prospects of both companies.”

It was a sharp reversal to their blunt and public position three months ago, when the Redstones all but demanded that the companies reunite. But Shari Redstone’s plan depended on winning over Leslie Moonves, the highly regarded chairman and chief executive of CBS Corp., whom she had wanted to run the combined entity.

And Moonves had expressed doubt about how such a deal would benefit both Viacom, which has struggled, and CBS, which has prospered, long before the Redstones proposed the merger in September.

For Moonves, not only did the valuation of the deal have to be right. He also sought a level of strategic and operational freedom over the combined companies, according to three people briefed on the discussions who requested anonymity because the talks were private.

Over the past three months, special board committees at each company worked with advisers to explore the potential combination, although the two sides never reached the point of discussing specific pricing and other deal terms, according to one of the people briefed on the discussion.

Ultimately, the two sides couldn’t agree on valuation, especially as the Viacom side grew increasingly optimistic about the company’s future under the leadership of Bakish.

In the past month, since Bakish stepped into the role as interim chief, he impressed Viacom directors with his vision to revive its struggling television and film businesses.

Bakish, who started at Viacom in 1997, previously led the company’s international group and was considered a strong contender to permanently assume the position should Viacom remain independent. An engineer by training, Bakish is respected across the company for delivering strong results at his unit as the rest of the Viacom faltered.

Bakish has outlined his strategy in broad strokes — reinvigorating MTV, Comedy Central and other Viacom TV networks for the digital age, returning Paramount Pictures to growth, expanding the company’s international footprint — but has yet to reveal specific details. He is in the midst of working with executives and employees to create detailed short-term and long-term plans for the company.

The challenges are daunting. In the past fiscal year, which ended September 30, the company reported a 25 per cent plunge in profits and a 6 per cent drop in revenues.

Shari Redstone, the vice-chairman of Viacom’s board, said in a statement that she was excited by the strategy. “While there is much work to do, I firmly believe that Viacom has a bright future, and that confidence is underpinned by senior management’s commitment to innovation and a more coordinated, global approach to managing our brands,” she added.

The developments continue the roller-coaster year for the entertainment empire controlled by Shari Redstone and her father, Sumner, who is 93 and in poor health. The disruption included court battles in three states, the ousting of Viacom’s chief executive and now a complete turnaround on the call to combine CBS and Viacom.

At Viacom, that drama is likely to continue as new management attempts to reverse the company’s declining fortunes. CBS is expected to return to its steady position of strength.

“This announcement marks a formal breaking up for now; moreover, we do not envision a different suitor for Viacom,” said Anthony DiClemente, an analyst at Nomura.

The Redstone family controls about 80 per cent of the voting stock in CBS and Viacom through National Amusements, the private theatre chain company started by Sumner Redstone’s father.

Merging CBS and Viacom together under Moonves previously was considered to have provided a quick solution to finding new leadership for Viacom. Philippe P. Dauman was ousted this year as chief executive of Viacom.

Shari Redstone, who was a driving force behind the removal of Dauman, continued to publicly advocate for the deal. At The New York Times’ DealBook conference in New York last month, she said the corporate merger was more important than ever before, because entertainment companies that create content needed to get bigger in order to increase their bargaining power against distributors like Comcast and AT&T.

“Scale matters because it is going to give us leverage,” Shari Redstone said at the conference, “and we are going to need leverage with some partners.”

She did note, however, that it would be possible for the two companies to remain independent. “They are two strong companies, and they both will survive.”

In the letter to the CBS and Viacom boards, the Redstones said they had concluded that this was “not the right time to merge the companies”.