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Redstone push is on to reunite CBS and Viacom

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Media mogul Sumner Redstone’s firm is calling for CBS and Viacom to combine again, more than a decade after they went their separate ways.

Redstone’s National Amusements, which owns most of the voting shares of the two companies, sent a letter to CBS and Viacom board members Thursday arguing that a tie-up would help the combined companies better compete in a rapidly changing media industry. Nation Amusements is a movie theater operator run by Viacom’s founder Redstone, 93, who oversaw the split of CBS and Viacom in 2006.

At the time, the split was intended to let the more profitable Viacom, which owns cable channels MTV, Nickelodeon and VH1, operate separately from CBS, which produces TV shows and owns its namesake network, as well as CBS News and its website

Sumner Redstone and his daughter Shari Redstone in 2012. Both now own controlling stakes in CBS and Viacom and want the two media giants to merge. Katy Winn/Invision/AP

But the TV business is changing dramatically as more people cut the cable cord and choose to stream TV shows or movies on Netflix, Hulu and other services. Viacom has been struggling with too-few hits from its movie studio Paramount Pictures and sagging ratings, while CBS has fared better in prime time with sporting events and popular shows like “The Big Bang Theory” and “The Good Wife.”

Viacom said it expects its board will form a special committee of independent directors to consider the move. A CBS spokeperson said in an email: “CBS is in receipt of the letter, and the company will take appropriate action to evaluate what is in the best interest of CBS Corporation and its shareholders.”  

Shares of CBS, about $51 last Friday, were trading between $54 and $55 on Thursday after news of the National Amusements letter emerged. Shares of Viacom were up more than 3% on the news, at abot $37.80 on Thursday afternoon.

The move to merge follows the settlement of a long running legal battle between longtime Viacom CEO Phillippe Dauman and Sumner Redstone’s daughter Shari, now a Viacom director and president of National Amusements, over the fate of Redstone’s media empire.

In August Viacom CEO Phillippe Dauman said he would step down, effectively ceding victory to the Redstones. Viacom’s interim CEO Tom Dooley will leave Nov. 15. Some have speculated that CBS CEO Leslie Moonves could to take charge if the two companies combine, although Moonves has said in the past he doesn’t believe a merger would be a good idea.

MoffettNathanson analyst Michael Nathanson said in a client note that the move makes sense because the combined company would be paid more by affiliates. Together they deliver 23 percent of national viewers, but are paid only 14 percent of affiliate fees. Viacom’s networks would fare better if they were CBS branded, he added, and the combined company could also cut down on corporate costs and executive compensation.

The news “represents the next chapter in a story that in our minds should have never occurred to begin with,” Nathanson wrote.