Media mogul Sumner Redstone's National Amusements is abandoning a proposal that CBS and Viacom reunite after a 10 year split.
The news comes as Viacom named acting CEO Bob Bakish as its permanent head.
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 and appointed him permanent president and CEO on Monday.
The appointment caps off a management saga that culminated earlier this year, when longtime Viacom CEO Phillipe Dauman was pushed out following a legal battle with media mogul Sumner Redstone's daughter, Shari Redstone, over control of the company. The fight ended with Shari Redstone as a Viacom director and president of National Amusements, which has a controlling stake in CBS and Viacom. At the time Tom Dooley was named interim CEO, but he announced unexpectedly he was leaving in October and Bakish was then named acting CEO.
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 $3.01, or 7.8 percent, to $35.61 in afternoon trading Monday. CBS Corp. Class B shares slipped 4 cents to $62.52.
Explore further: Viacom names Robert Bakish acting president, CEO