(WASHINGTON POST) - The parent company of CBS and Viacom is urging the two companies not to merge, reversing course on a major proposal that had been portrayed as a potential boon to both companies.
In a letter to the boards of CBS and Viacom on Monday (Dec 12), National Amusements (NAI) - a privately held entertainment firm that owns controlling shares of both subsidiaries - said that now was "not the right time" to merge the companies.
Pointing to recent changes in Viacom's management, NAI said it was convinced that the struggling cable and film company boasted "forward-looking thinking" and had a compelling strategic plan.
Since 2014, Viacom's stock has fallen roughly 60 per cent, while shares of CBS are at about the same level they were two years ago.
"CBS continues to perform exceptionally well under Les Moonves," NAI's letter read, "and we have every reason to believe that momentum will continue on a stand-alone basis."
Viacom said Monday that it had received the letter and would provide updates "accordingly."
NAI's letter reflects a change in tone from September, when NAI executives urged CBS and Viacom to consider a deal. The potential tie-up would undo the split that turned CBS and Viacom into two separate companies in 2006.
At the time, the breakup was pitched as a way for each company to operate more nimbly in a changing media industry. That logic appeared to be in play three years later when AOL and Time Warner parted ways in one of the biggest media breakups in history.
But since then, the industry has seen a comeback in consolidation as more entertainment and content migrate to the Internet. Analysts say businesses are increasingly trying to amass troves of media content against which they can sell valuable, technology-driven targeted advertising and extract lucrative licensing fees from other businesses that wish to air that content.
NAI in September said recombining CBS and Viacom would allow executives to "to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape." It also suggested that the two firms should study how to continue their operations as independent companies.
Now NAI has concluded that it's best for the two companies to stay separate, after all.