LOS ANGELES -- After flirting with the prospect of bringing Viacom Inc. and CBS Corp. together as one company, Shari Redstone on Monday abruptly pulled the plug on the proposed consolidation.
"Over the past few months, 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," Shari Redstone and her father, Sumner Redstone, said in a letter to both firms' boards of directors.
The Redstones control nearly 80 percent of the voting shares of both companies through their Massachusetts-based investment vehicle National Amusements Inc.
Shari Redstone, who is president of National Amusements as well as vice chairman of both Viacom and CBS, asserted her authority over the family's holdings earlier this year as her 93-year-old father's health deteriorated.
Initially, the Redstones viewed a merger as the best way to boost the value of Viacom, whose stock has fallen dramatically in the past two years, and make the family's media empire whole again. The proposed consolidation was expected to be a crowning achievement for the aging media mogul -- bringing together his sprawling media assets into one large company that could better navigate the challenges facing traditional media companies as consumer viewing habits change.
Shari Redstone was widely expected to tap CBS Chief Executive Leslie Moonves to run the combined company. However, the marriage broke down over proposed valuations for Viacom and Moonves' request for autonomy running the combined company, according to three people familiar with the situation who were not authorized to discuss the matter.
Moonves had been seeking assurances to run the merged company as he saw fit because CBS is substantially stronger. Moonves wanted the power to make changes in Viacom personnel, and he wanted a board with which he felt comfortable.
At one point, Moonves favored a provision that any change in his status as chief executive would require a super-majority vote of the combined company's board, according to one of the people with knowledge on the matter. That would have diluted the Redstone family's clout to make changes like it did earlier this year when it shook up the Viacom board.
Some Viacom board members were uncomfortable with such a measure, particularly after the Redstone family's high-profile and expensive battle to unseat Viacom's previous CEO, Philippe Dauman. However, another person said merger plans were halted before the two committees attempted to hammer out an agreement with Moonves to give him the latitude that he said he would need.
In the end, though, trying to put a value on Viacom's shares proved too complicated. CBS board members did not want to punish their shareholders by paying too high a price for Viacom given the ratings declines at key networks and missteps at Paramount Pictures.
The Hollywood movie studio lost nearly $450 million in the last fiscal year, and its film pipeline has been meager.
Just before Thanksgiving, Viacom's board committee made a case to CBS' special committee members that Viacom's shares were worth considerably more than current trading levels -- and more than what CBS was willing to pay.
CBS wasn't prepared to go above $38 to $40 a share for Viacom, which has lost nearly 50 percent of its value in the last two years.
News that the Redstones were abandoning the merger talks sent Viacom's shares tumbling more than 9 percent to close at $34.99. CBS shares closed down less than 1 percent to $62.18 a share in Monday trading -- still higher than a few months ago.
Information for this article was contributed by Samantha Masunaga of the Los Angeles Times.
Business on 12/13/2016