National Amusements pulls CBS, Viacom merger proposal

By Jessica Toonkel and Greg Roumeliotis

NEW YORK (Reuters) - Sumner Redstone's National Amusements said Monday it has stopped pushing its media properties CBS and Viacom to merge, citing progress by Viacom's new leadership, in place only a few weeks.

Shares of Viacom tumbled 6.9 percent. CBS shares rose 1.8 percent, touching a nearly 2-1/2 year high after CNBC cited a report that Verizon Communications Inc was interested in buying the company. Verizon declined to comment.

"Following the management changes that the Viacom Board put in place, we have been very impressed with the forward-looking thinking and strategic plan being pursued under Bob Bakish's leadership," National Amusements said in a letter to both boards.

Viacom named Bakish, who was head of the company's international business, acting chief executive officer at the end of October.

While Viacom and CBS never entered negotiations around pricing, the two parties were far apart on what Viacom could be valued in a deal, according to two sources familiar with the situation.

Viacom, which owns Nickelodeon, Comedy Central and MTV, has been struggling to turn around declining ad revenue and ratings. CBS, home to popular shows such "The Big Bang Theory" and Thursday night football, topped Wall Street expectations in the third quarter.

Mario Gabelli, whose firm is the second largest owner of voting shares of Viacom and CBS, said he was not disappointed with today's news and that he still believes that ultimately the two might merge.

"Viacom needs to be fixed," he said.

Gabelli said he is encouraged by how Bakish has managed Viacom's international business, and believes he can do a lot to turn the media company around.

One sticking point in negotiations was that CBS' Les Moonves wanted autonomy over the merged company.

National Amusements, owned by Sumner Redstone and his daughter Shari Redstone, was willing to compromise on this issue, but in the end decided to go with Bakish, according to the sources, who wished to remain anonymous because they were not authorized to speak publicly.

Over the past few weeks, Bakish has met with the Viacom board, Shari Redstone and other executives, to discuss his plans, Bakish told Reuters last month.

CHANGING CORPORATE CULTURE?

Bakish has already made changes. Last month, the company announced it was buying Argentine broadcaster Television Federal SA from telecom carrier Telefonica SA for $345 million.

He is also taking a different approach with regard to affiliate relations. Last week, Bakish replaced Viacom's head of distribution, Denise Denson, a longtime executive who worked closely with former CEO Philippe Dauman.

Bakish is also working on a plan to turn around MTV, a top priority for him, he told Reuters in November.

Shari Redstone and her father, 93-year-old Sumner Redstone, control 80 percent of CBS and Viacom voting shares through privately-held National Amusements. Sumner Redstone has not spoken on an investor call since 2014.

In September, National Amusements called on Viacom and CBS to consider recombining. Viacom was spun off from CBS in 2006, but Shari Redstone has been in favor of recombining the two under Moonves, sources have previously told Reuters.

Industry speculation that the two might tie up increased this year after the Redstones prevailed in a power struggle that resulted in Dauman's departure.

A Viacom spokesman confirmed it had received the letter from National Amusements, which was first reported by CNBC. A CBS spokesman declined to comment.

National Amusement's letter also said, "CBS continues to perform exceptionally well under Les Moonves." In fact, relations between Moonves and Shari Redstone continue to be good, the source said.

This week, Shari and Leslie will be going to Boston for the premiere of "Patriots Day."

(Writing by Anna Driver; Editing by Nick Zieminski)