Shares of Viacom, Inc. (VIAB), media conglomerate, tumbled 7.5% on Monday.While the stock has been in a slump for most of the year, down 13.3% year-to-date, a key announcement from the company sent the stock plunging further.
Here’s why the stock declined:
Viacom-CBS Merger Falls Through
The proposed merger of Viacom and CBS fell through, leaving the troubled media company to move forward on its own.
The company named Robert M. Bakish CEO on Monday after receiving orders to stop pursuing a merger CBS.
Sumner Redstone, founder of the $40 billion media conglomerate, and his daughter Shari Redstone said in a letter to the Viacom and CBS boards that the two companies should go their separate ways. The move, according to the letter, was based on an “assessment of the strengths, progress and future prospects of both companies.”
The letter is a stark contrastto the tone in September, when executives of National Amusements urged Viacom and CBS to consider a merger.
Combining both companies would undo a split that turned Viacom and CBS into two separate entities in 2006.
Both companies had been exploring the combination over the last three months, with both assigning special committees to the task. But the exploration never reached the point of discussing deal terms or pricing.
Neither side could come to an agreement on valuation. Viacom grew increasingly optimistic about Bakish as CEO.
Bakish, who has been with Viacom since 1997, has been praised for delivering strong results even as the rest of Viacom struggled.
Bakish has plans to reinvigorate struggling networks, like Comedy Central and MTV, and restoring Paramount Pictures to growth.
Shari Redstone remained optimistic about Bakish’s appointment.
“I firmly believe that Viacom has a bright future, and that confidence is underpinned by senior management’s commitment to innovation and a more coordinated, global approach to managing our brands,” Shari Redstone said.
Viacom’s stock has plunged nearly 60% since 2014. Shares of CBS have remained virtually unchanged for the last two years.
