Viacom and cbs split into two separate companies for which of the following reasons?

Viacom, the entertainment company controlled by Sumner M. Redstone, said in a statement that it had completed a plan to split itself into two companies, the CBS Corporation and Viacom Inc.

Shares of the New York-based companies will begin trading on the New York Stock Exchange tomorrow. They have changed hands on a when-issued basis since Dec. 5.

Investors are to receive one CBS share and one Viacom share for each two of Viacom that they now own. Both stocks will be part of the Standard & Poor's 500-stock index.

When-issued shares of the "new" Viacom were unchanged Dec. 30 at $40, down 6.7 percent since Dec. 5. CBS rose 50 cents, to $25.50, down 4.5 percent since it started trading.

Mr. Redstone engineered the breakup, which was announced in June 2005, to separate faster-growing Viacom from CBS, which owns radio and television networks.

Viacom owns the MTV cable television business and the Paramount Pictures studio. CBS owns Simon & Schuster publishers, the Showtime cable network and Paramount Parks. In the reorganization, Mr. Redstone will be chairman of both companies; he handed the chief executive posts to Thomas Freston at Viacom and to Leslie Moonves at CBS.

Correction Appended

Viacom said yesterday that it was weighing a plan to divide its businesses into two public companies, a move that would unravel years of empire building by the chief executive, Sumner M. Redstone, while resolving the company's succession issues.

One company, led by Leslie Moonves, the co-president, would include CBS, its television stations, outdoor advertising and radio. The other, to be led by the co-president Tom Freston, would include MTV, Nickelodeon, Showtime and the other cable networks. It would also include Paramount Pictures, Paramount Television and Simon & Schuster.

The announcement is the second in two days by a media company preparing to split up assets. On Tuesday, Liberty Media announced that it would spin off the Discovery Holding Company.

Those plans raise the question of whether, after a decade of building media conglomerates, companies will now start breaking them up. Already there is a drumbeat among investment bankers to promote such splits.

The Viacom move is aimed at increasing the value of the company's depressed stock. Shares of Viacom have fallen from where they were in September 1999, when Viacom announced its merger with CBS.

"There are a lot of frustrated people at the company," said one executive who spoke on condition of anonymity. "There are an awful lot of people here whose stock options are underwater."

The move answers the succession question at Viacom by giving Mr. Moonves and Mr. Freston their own public companies to run.

When Viacom and CBS merged, company executives hoped that by combining Viacom's more youth-oriented cable networks, like MTV, with CBS, which attracted older viewers, the company could offer advertisers one-stop viewing for audiences of all ages.

In addition, the merger was said to offer benefits like allowing the marketing of MTV programming on CBS's radio stations.

The acquisition followed Mr. Redstone's hard-fought battle with QVC to acquire the Paramount Pictures Corporation, which Viacom won in 1994.

But that aggressive growth strategy failed to pay off, at least in terms of Viacom's stock price. Shares were trading at $46.30 a share on Sept. 8, 1999, the day after the CBS deal was announced. Shares rose $2.71 yesterday, to close at $37.

Last year, Viacom spun off its Blockbuster unit.

"It is a momentous event that Sumner is willing to admit he was wrong and get smaller to create shareholder value," said Richard Greenfield, a media analyst at Fulcrum Global Partners. "He is totally reversing everything that has occurred since 1995 and totally undoing all the size and scale that he hoped to create through acquisitions. Despite the mergers, the stock has not performed well."

Each of the new companies would still be controlled by Mr. Redstone, through his ownership of 12 percent of the company's equity and 71 percent of its votes. The company is positioning Mr. Moonves's company to appeal to value investors, because it would grow more slowly but generate strong cash flow that could be used to pay dividends and buy back shares.

Mr. Freston's company would have more of the characteristics of a growth company, Mr. Redstone said.

Though each company would have the additional cost of paying separate staffs, Mr. Redstone said yesterday that Viacom hoped that by more clearly defining each group of assets, it might attract new investors who want either value or growth.

Several people close to the company said Viacom had also weighed spinning off the slow-growing radio company into a third business, but decided against that as not aggressive enough.

Yesterday, Mr. Redstone said he had been considering a split since he appointed Mr. Freston and Mr. Moonves in June 2004. Several people close to the transaction said, however, that investment bankers had been aggressively promoting it and that the plan was worked out over the last two weeks.

Although Viacom seems likely to complete the split, there are a number of issues -- including how much debt each company would bear -- that have not been resolved.

A raft of bankers are working on the deal, including Morgan Stanley, Bear Stearns, Citibank and Lazard. Indeed, Lazard was one of the first bankers involved. Bruce Wasserstein, the head of Lazard, is a distant cousin of Mr. Moonves.

Despite the rise in share price yesterday, some analysts were skeptical that the split would impress investors over the long term.

"It sounds a bit desperate to me," said Dennis Leibowitz, who runs Act II Partners, a hedge fund. "It seems more of a financial shenanigans."

But Mr. Redstone was optimistic, noting that the benefits would include giving MTV a "high multiple" stock it could use for acquisitions.

Analysts say there are a variety of reasons Viacom has not done better. Some investors became worried about the slowing growth in advertising, a revenue stream threatened by digital video recorders and increasing interest in Internet advertising. Viacom has also been plagued by management problems. During the years that Mel Karmazin was president of the company, he and Mr. Redstone were constantly at war and appeared to have different ideas about how the company should be run.

When Mr. Redstone appointed co-presidents, both of whom were highly regarded, analysts worried about the inevitable rivalry between them. "These bake-offs never produce great management results," said one executive who is close to the company, but who insisted on anonymity.

Correction: March 18, 2005, Friday An article in Business Day yesterday about a proposal for Viacom to split into two companies misidentified the one that would take control of Paramount Television. It is the one led by Leslie Mooves, a Viacom co-president, not the one led by Tom Freston, the other co-president.