Sumner Redstone and his daughter Shari, the CEO and President of National Amusements, have had a turbulent relationship over the years but when it comes to the family business, which includes Viacom (NYSE:VIA) and CBS (NYSE:CBS), they want to keep it all in the family.
The father-daughter team, controlling shareholders, withdrew their support of the proposed merger of the two media giants, ending the negotiations that could have brought the band back together again after their split in 2006. Viacom shares tumbled nearly 8% on the news, while CBS shares ended the session little changed.
Talks between the two sides became strained after the CEO of CBS, Les Moonves, requested total autonomy over the combined company in order to move forward with a deal. However, the Redstones did not want to give up their positions of power, sources tell the FOX Business Network.
The Redstones sent a letter to board members of both companies requesting that they discontinue working on the merger, and confirmed they were walking away from a deal. “After careful assessment and meetings with the leadership of both companies, we have concluded that this is not the right time to merge the companies,” said the letter signed by Shari and Sumner Redstone.
Contention between the two sides was evident in October when the Redstones refused to give Moonves a voting stake within NAI, if the two powerhouses were to merge. At the same time, sources close to Moonves said he was getting concerned about the proposed valuation of Viacom. If, under his direction, they paid too much for the struggling media conglomerate it might have punished CBS shareholders and torpedoed the stock. CBS shares have gained more than 33% over the past year.
Viacom, whose cable television networks include Comedy Central, MTV, and Nickelodeon, has seen its TV ratings drop significantly, and as a result its debt has grown to over $12 billion.
However, none of this means that a deal is totally off the table. According to people familiar with the matter, the Redstones have not given up entirely on remerging the two companies. One source said “it’s not over, but there’s no timeline set to when both parties could come back to the table.” Another source close to the negotiations said before today’s announcement, the odds of working out a deal were just over 50%. That same source now says the chances of combining the companies have slipped a little below 50% and the Redstones are leaving the door open to broach merger discussion in the future.
The Redstones have had a history of battling with their CEOs. Former Viacom CEO Philippe Dauman was forced out when he tried to fight the Redstones in an antitrust dispute, after he was removed from the Redstone family trust. After Dauman stepped down, Tom Dooley, a close confidant and ally of Dauman’s, became the CEO on an interim basis, and eventually resigned after trying to unload a piece of Viacom’s struggling movie studio, Paramount Pictures.
Shortly after the Redstones discontinued their pursuit of a merger, Viacom announced it would name Bob Bakish as President and Chief Executive Officer. Bakish has served as Acting President and Chief Executive Officer of Viacom since November 15. He has held leadership positions throughout the organization since joining in 1997, most recently serving as President and Chief Executive Officer of Viacom International Media Networks.
In the letter to CBS and Viacom, the Redstones said they believe that the companies can thrive separately, citing Bakish’s “forward-looking thinking and strategic plan,” as well as confidence that Moonves could continue to deliver strong results at CBS.