CBS Inc. yesterday formally rejected a proposal by Denver oil millionaire Marvin Davis to buy the company for $3.7 billion.

The $160-a-share takeover proposal was rejected in a letter to Davis from CBS Chairman Thomas H. Wyman, who repeatedly has said CBS should remain an independent public company.

Davis expressed his desire to buy CBS in two recent meetings with Wyman. His takeover proposal was submitted to CBS last Wednesday, sources said. Davis also suggested to CBS that his Washington lawyer, Edward Bennett Williams, could play an important role in the deal by acting as a public trustee who would guarantee the independence of the CBS news division.

Davis, concerned that his proposal would be rejected because of Wyman's desire to keep the company and its news operations both independent and public, promised that he would consider "any reasonable mechanism to guarantee the independence of CBS news," one source said. Despite these efforts, Wyman rejected the takeover proposal.

Wall Street analysts said CBS management could easily reject the Davis takeover proposal because it did not offer much of a premium over the current stock price. CBS stock closed yesterday at $147, up $1.

Analysts have said that the underlying value of the firm's assets could be as high as $200 a share. That price is often cited by analysts speculating on the value of a successful takeover bid for CBS, which has substantial publishing and record operations in addition to the television network.

At $200 a share, it would cost nearly $4.7 billion to acquire CBS, not including the debt already on the company's balance sheet. The Davis proposal was worth about $1 billion less.

Although CBS defeated a controversial hostile takeover bid from Atlanta broadcast executive Ted Turner last year, the company has continued to be the target of takeover speculation. CBS is the only major television network that did not agree to be taken over last year, and the company reiterated its desire to remain independent yesterday.

"CBS is not engaged in any negotiations regarding the ownership or control of the company," Wyman said. "Our view today is no different than it was in 1985. We intend to pursue our objectives as an independent company."

"In light of the critical services that CBS performs, both the board of directors and management believe that CBS should be a publicly held company," added CBS Senior Vice President William Lilley III.

Davis is not expected to make a hostile takeover bid for CBS. Yesterday, he described his initial CBS takeover proposal as "friendly."

"After careful study, we determined to submit an offer to acquire all of the shares of CBS Inc. for cash at $160 a share," Davis said. "We told CBS that our offer was not subject to financing and that we intended to retain current management.

"We also told CBS that we would only proceed on a friendly, negotiated basis," Davis said. "Today, we received a letter from CBS rejecting our offer and stating the company's desire to remain independent."

CBS management remains concerned about the possibilty of unsolicited takeover bids. At a recent meeting with Wall Street analysts, Wyman argued that the company was safe from a hostile takeover.

Wyman said there was enough CBS stock in friendly hands to deter many potential bidders. He said Loews Corp. Chairman Laurence A. Tisch, who was invited to join the CBS board of directors so that he could help the company fight unsolicited takeover bids, owns about 12 percent of CBS. In addition, CBS founder William Paley has 8 percent and CBS employes own 3 percent.

"The configuration of our stock ownership and balance sheet are different now in important ways that make the company less attractive for many potential hostile acquirers," Wyman said.

The stock configuration did not deter Davis from proposing a friendly acquisition. While Davis would not rule out the possibility of making another offer for CBS, sources said it was unlikely he would make a hostile takeover bid for CBS.

One source said that Davis appears eager to buy a major entertainment company. The Denver executive left the entertainment business last year when he sold his 50 percent interest in Twentieth Century-Fox Film Corp. to Rupert Murdoch for $325 million.

Murdoch also purchased the Metromedia group of television stations last year for $2 billion. Davis, who initially was Murdoch's partner in the Metromedia deal, later withdrew and has since been rumored to be considering acquiring major positions in companies, including Time Inc., Warner Communications Inc. and MGM/UA Entertainment Co.

Ted Turner completed his acquisition of MGM/UA yesterday, and he has indicated he may sell significant portions of the operation, including MGM's Hollywood studio. Davis would be one of the top names on Turner's list of potential buyers.

Although he does not appear to have been involved in the Davis takeover proposal, CBS founder William Paley knows Davis because he invested in some Davis oil deals. Other investors in Davis deals have included former president Gerald Ford and former secretary of State Henry Kissinger. Sources said that Davis' once-close relationships to some of these well-known personalities have cooled because the oil deals were less successful than expected.