Media mogul Sumner Redstone's National Amusements is abandoning a proposal that CBS and Viacom reunite after a 10 year split.
National Amusements, which owns most of the voting shares of the two companies, had urged the companies to combine in September, saying that a tie-up would help them compete better as technology and the entertainment industry rapidly evolve.
Now, the company, run by Redstone and his daughter Shari, says that following management changes at Viacom and strength at CBS, which operates CBS, Showtime and other entities, it makes more sense for the companies to continue as separate entities.
Viacom, which owns the Paramount Pictures movie studio and pay TV channels such as Comedy Central, MTV, BET and others, has been struggling to improve its profit as Paramount has struggled to produce hits and cable viewership declines. The company named Robert Bakish as acting president in late October.
Meanwhile, as more people cut the cable cord, choosing instead to stream TV shows or movies online at places like Netflix, Hulu, iTunes and Amazon.com, CBS has found success under Les Moonves streaming its popular shows like "NCIS" and "The Big Bang Theory," as well as its stand-alone, streaming Showtime channel.
There would have been cost savings if the companies combined, but strategically, the positives weren't as clear, said Instinet analyst Anthony DiClemente.
"This allows CBS to continue to operate in a very nimble and autonomous fashion," DiClemente said. "For Viacom, I think in terms of long term strategy, the verdict is still out."
Viacom said in a statement that it received the letter sent by National Amusements and will provide more updates later. CBS referred comment to National Amusements.
Viacom Inc. Class B shares fell $3.09, or 8 percent, to $35.53 in midday trading Monday. Its shares are down more than 14 percent over the past year.