Viacom is going it alone. The troubled media company named Robert M. Bakish as its new chief executive on Monday 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 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 Ms. Redstone's plan depended on winning over Leslie Moonves, the highly regarded chairman and chief executive of CBS Corporation, whom she had wanted to run the combined entity. And Mr. 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 Mr. Moonves, not only did the valuation of the deal have to be right, but 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 could not agree on valuation, especially as the Viacom side grew increasingly optimistic about the company's future under the leadership of Mr. Bakish.
In the past month, since Mr. Bakish stepped into the role as interim chief, he impressed Viacom directors with his vision to revive its struggling television and film businesses.
Mr. Bakish, who started at Viacom in 1997, previously led the company's international group and was considered a strong contender to assume the position permanently should Viacom remain independent. An engineer by training, Mr. Bakish is respected across the company for delivering strong results at his unit even as the rest of Viacom faltered.
Mr. Bakish, 52, 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 latest fiscal year, which ended Sept. 30, the company reported a 25 percent plunge in profits and a 6 percent drop in revenues.
Ms. Redstone, the vice chairwoman of Viacom's board, said in a statement that she was "excited by the strategy."
"While there is much work to do," she continued, "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."
The developments continue the roller-coaster year for the entertainment empire controlled by Ms. 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 tries to reverse the company's declining fortunes. CBS is expected to return to its steady position of strength.
"This morning's announcement marks a formal breaking up for now; moreover, we do not envision a different suitor for Viacom," Anthony DiClemente, an analyst at Nomura, said.
The Redstone family controls about 80 percent of the voting stock in CBS and Viacom through National Amusements, the private theater-chain company started by Mr. Redstone's father.
Merging CBS and Viacom under Mr. Moonves previously was considered to have provided a quick solution to finding new leadership for Viacom. Earlier this year, Philippe P. Dauman was ousted as chief executive of Viacom. Thomas Dooley, the interim chief executive, then left in mid-November, when Mr. Bakish assumed the position.
Ms. Redstone, who was a driving force behind the removal of Mr. Dauman, continued to publicly advocate the deal. At The New York Times's 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," Ms. 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 Monday's letter to the CBS and Viacom boards, the Redstones said they had concluded that this was "not the right time to merge the companies.''
Shares in Viacom's declined about 9 percent on Monday, while shares in CBS were about flat.
Also on Monday, court documents filed by an ex-girlfriend of Mr. Redstone's raised new questions about his mental competence as well as corporate governance issues that have plagued the companies for more than a year. In October, Mr. Redstone sued two ex-girlfriends over civil claims including elder abuse, seeking about $ 150 million that his lawyers said he was tricked into giving the two women.
Sydney Holland, the former girlfriend, said in the court filing that Mr. Redstone's gift to her in May 2014 came at the same time that Mr. Redstone remained "very active in the business activities of Viacom and CBS." In the document, Ms. Holland states that Mr. Redstone gave several other women tens of millions of dollars in exchange for sexual favors, including a Paramount employee.
Robert N. Klieger, a lawyer for Mr. Redstone, called the assertions "a work of fiction punctuated by not-so-subtle threats of extortion and an overwhelming stench of greed."
War has spread across the empire of Sumner Redstone, one of the entertainment industry's most tenacious titans. At stake are the fortunes of his family and confidants, as well as the fate of Viacom and CBS.
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