(Adds detail about Paulson's firm, adds Viacom share performance compared to media index)
April 11 (Reuters) - Paulson & Co, the hedge fund firm led by billionaire investor John Paulson, has taken a stake in Viacom Inc as the U.S. media company has started to turn around its business, Paulson told Reuters in an interview.
Over the past few months, Paulson has bought 3.7 million nonvoting shares of Viacom, which he said on Tuesday has begun to show positive results under a plan overseen by Chief Executive Bob Bakish after years of declining advertising and viewership.
"We are very impressed with the turnaround," Paulson said. "It is starting to look attractive."
Paulson & Co surged to fame a decade ago when a winning bet against the overheated housing market helped the New York-based firm pull in billions in new money to manage roughly $38 billion at its peak. The firm's assets have since shrunk to around $9 billion.
Paulson said he began buying shares of Viacom before the company began re-exploring a merger with CBS Corp, whose shares he does not own.
CBS and Viacom, both of which are controlled by media moguls Shari and Sumner Redstone, began exploring a merger in February. The companies are negotiating the price of a deal, which is expected to be all-stock, and who will run the combined company, sources have told Reuters.
A merger of CBS, which owns its broadcast network and premier channel Showtime, and Viacom, the owner of Paramount Pictures and such networks as Comedy Central and MTV, would give the company scale at a time when many competitors are merging, Paulson said.
Paulson said he has been impressed with Bakish's focus on deals with online streaming services and mobile deals.
Viacom recently announced a deal with Telefónica SA in Latin America to give its mobile subscribers access to Viacom's networks and shows.
Paulson also noted improvements at Paramount Pictures under its new head, Jim Gianopulos. The studio's horror movie "The Quiet Place," which opened last weekend, was No. 1 at the box office, garnering $50 million in ticket sales in the United States and Canada.
Paulson estimated that a combined CBS/Viacom could realize more than $1 billion in synergies, adding that he hoped the two companies can agree on a management structure that includes CBS CEO Leslie Moonves and Bakish.
Despite Bakish's efforts, Viacom's shares are down 12 percent since he took over. The Dow Jones U.S. Media Index is down around 1 percent for the same period.
(Reporting by Jessica Toonkel Additional reporting by Svea Herbst-Bayliss Editing by Jonathan Oatis and Steve Orlofsky)