What’s next for Viacom? Most likely, lawsuits and a nasty shareholder fight to determine the fate of the parent company of Paramount Pictures, Comedy Central, BET and more.
A war brewing for many years has now exploded into full public view, with no way to predict what or whom it may engulf. Late Friday, Sumner Redstone, or people operating on behalf of the ailing 92-year-old mogul, moved to eject two longtime Viacom board members from a trust that could ultimately control the company.
One of the people booted from the inner circle was Viacom CEO Philippe Dauman, who through a spokesman blasted the trust maneuver as “invalid and illegal.” He accused Redstone’s 62-year-old daughter, Shari Redstone, of manipulating her father to “seize control” of Viacom.
Shari Redstone responded Saturday with a brief statement simply saying she supported her father’s decisions.
On one hand, the Redstone affair makes for compelling family drama. Shari Redstone was in the past estranged from her father, although as his health declined she has evidently spent much more time with him — and according to Dauman and others, she has cut off his contact with the outside world. On Saturday, Fred Salerno, Viacom’s leading outside director, complained in a statement that he had been denied a request for a face-to-face meeting with Sumner in recent weeks.
But the larger battle is over the fate of Viacom, one of the six major media companies that dominate the entertainment industry today (another one of those giants, CBS Corp., was formed when Viacom split 10 years ago). The company has not performed well recently, to put it mildly; Friday’s closing stock price of $39.05 represented a 43 percent plunge from Viacom’s 52-week high.
Some have blamed Dauman for failing to keep Viacom relevant and moreover for making too much money, including a $37 million paycheck for fiscal year 2017. But the company’s assets are still powerful, reaching tens of millions of people every day.
While it’s far too soon to predict the eventual outcome, it’s very likely that the weekend trust maneuver — call it a Friday Night Massacre, if you will — is headed toward a lawsuit, perhaps as early as next week. Dauman’s camp clearly pointed toward a search for legal remedy by calling the Friday move “invalid and illegal.”
The timing is key. Dauman and another Viacom director, longtime Redstone attorney George Abrams, were thrown out of the trust just days after the Viacom board had eliminated Sumner Redstone’s compensation on the grounds that the nonagenarian was no longer capable of being involved in the business.
If Sumner Redstone dies or is declared legally incompetent, the trust will begin operating in his stead. Given the precarious state of the senior Redstone’s health, therefore, someone wishing to assert future control over Viacom had to make sure that any unwanted parties would disappear from the trust as quickly as possible.
The ultimate prize of course is not the trust but rather control of Viacom itself, which Shari Redstone and her father have been tussling over for years. And that’s where things get complicated. Voting control of Viacom is held through National Amusements, a privately held theater chain which is 80 percent controlled by Sumner Redstone, with the remainder going to Shari.
Shari Redstone could conceivably move to get rid of Dauman and the entire Viacom board. But she apparently doesn’t have the power to do that unilaterally, at least not while her father is alive. A proxy fight, gathering enough shareholder votes to topple management, could not be mounted until sometime in 2017, when Viacom has its next annual meeting.
A more readily available option for the Redstone camp could be a so-called action of written consent, in which dissident shareholders try to accumulate enough leverage to dump the board and top executives. But that move is much rarer than a proxy fight and is not allowed by many corporate bylaws. Whether Viacom rules would permit such a takeover attempt is unclear.
What is virtually certain, however, is that this weekend’s moves will lead to a dramatic endgame in the succession battle at Viacom.
(pictured: Sumner Redstone, Shari Redstone, Philippe Dauman.)