Settlement to end Viacom war would have CEO Philippe Dauman replaced by Tom Dooley
Talks have accelerated to end the bitter boardroom dispute between Sumner and Shari Redstone and Viacom’s top officers, with Chief Executive Philippe Dauman expected to leave with a generous exit package, according to three people close to the situation.
But the potential sale of a sizable stake in Paramount Pictures could prove to be a roadblock to a deal.
As part of the compromise being negotiated, Viacom Chief Operating Officer Thomas Dooley would be elevated to chief executive, according to people familiar with the deal who asked not to be identified because of the delicate and confidential nature of the settlement talks.
In addition to Dauman’s departure, the Redstone family is determined to see the Viacom board get an overhaul. The two sides are near an agreement that Viacom’s existing board members would continue to serve for several months before five new directors take seats on the board, according to another person familiar with the talks.
One issue still being debated is whether to allow Viacom board’s to vote on Dauman’s plan to sell 49% of Hollywood movie studio Paramount Pictures to an outside investor. Dauman had hoped a deal with a deep-pocketed investor, believed to be Dalian Wanda Group of China, would boost Viacom’s stock price and give the movie studio and Viacom’s TV channels inroads into China.
But the Redstones believe that Paramount is core to Viacom’s operations and its future. They have strenuously opposed Dauman’s plan to unload such a sizable stake and have said they would want the new directors to weigh in on any Paramount deal.
Dauman, 62, has agreed to leave Viacom after 10 years in the top job with a golden parachute paying him about $85 million.
According to people familiar with the matter, Sumner Redstone’s longtime lieutenant recognized that he would have to step down to resolve the impasse that has become a major distraction for the media company. The bitter boardroom battle with Sumner and Shari Redstone has made it nearly impossible for him to effectively run the company.
A settlement would end the feuding over the direction of the company and pave the way for the removal of the old guard of Viacom that Shari Redstone, the company’s vice chair, and her father have indicated that they want replaced.
Settlement negotiations have intensified in recent days but a deal is not complete and could still fall apart, sources cautioned.
Talks could snag over some current Viacom board members’ insistence that safeguards be put in place so that the Redstones could not unilaterally insert themselves into the operations of Viacom, as they have in recent months, without the support of independent board members.
Existing Viacom board members, on the other hand, would have to drop their opposition to allowing five new directors, identified in June, from taking office.
The Redstone family investment vehicle, National Amusements Inc., sent a letter to Viacom on June 16 saying it had voted its shares to replace five board members, including Dauman, with a new slate. A special meeting of shareholders could be called later this year or early 2017 to ratify the new board members.
The Redstone family, through National Amusements, control nearly 80% of the voting shares of the two media companies, Viacom and CBS Corp.
Both sides are motivated to find a compromise to end the nasty feud before a trial is set to begin in Massachusetts.
Last week, a Massachusetts probate judge moved up the date of the trial to Sept. 19 from early October, prompting the parties to ramp up settlement talks.
“There’s no question the Redstone family will want to settle this to avoid going to trial,” said William Klepper, a management professor at Columbia Business School. “Protecting the family name, and their legacy, comes with a price and going into court would pull back the curtain to expose skeletons and dirty laundry.”
The trial was expected to delve into whether Sumner Redstone was mentally competent or under undue influence of his daughter when he abruptly dismissed Dauman and another longtime associate, George Abrams, from a trust that will someday control his shares in the $40-billion media empire that includes Viacom and CBS.
Dauman and Abrams filed the lawsuit in Massachusetts in late May to try to reverse their dismissals from the trust and as members of the board of National Amusements.
The Massachusetts judge, in a recent ruling, indicated that he would explore whether Shari Redstone had exerted influence over her ailing 93-year-old father to orchestrate the boardroom maneuvers. Shari Redstone long has been critical of Dauman and other entrenched Viacom board members as the company’s performance lagged other media companies.
A Delaware judge separately scheduled a trial for Oct. 31 to review whether National Amusements’ action to replace Viacom board members was valid.
The proposed new board members include Nicole Seligman, who previously served as the president of Sony Entertainment Inc.; Thomas May, chairman of Eversource Energy; Ken Lerer, a managing partner of a New York-based investment firm whose portfolio includes BuzzFeed and Warby Parker; Ronald Nelson, executive chairman of Avis Budget Group; and Judith McHale, a former president of Discovery Communications.
Key players on each side of the dispute recognized that a protracted battle could further harm the company, which has seen the flight of several senior executives and talent, including Comedy Central’s former late-night duo of Jon Stewart and Stephen Colbert.
Viacom’s stock has slid more than 45% in the last two years. Shares closed Tuesday at $42.84, up 2 cents. Bloomberg News previously reported that a settlement likely would include Dauman’s exit.
Paramount’s ownership structure continues to be a question mark. In February, shortly after taking over as chairman of Viacom for Sumner Redstone, Dauman announced his plan to bring in an outside investor. But the plan infuriated Redstone, who made his displeasure known to Dauman and Paramount Chairman Brad Grey.
In June, National Amusements unilaterally changed Viacom’s bylaws to require that any sale of Paramount receive a unanimous vote by Viacom’s board.
Sumner Redstone has long considered Paramount his prized property after a hard-fought battle for the studio in 1994. In recent years, the studio has suffered through an extended slump as high-profile bets, including “Teenage Mutant Ninja Turtles: Out of the Shadows,” have turned in disappointing results at the box office.
Analysts have projected that the studio will post an operating loss of more than $300 million in fiscal 2016.
Another potential sticking point could be terms of Dooley’s contract to serve as chief executive.
Dooley, 59, who signed a new employment contract earlier this year, does not appear to be interested in the position on an interim basis.
Dooley joined Viacom in 1980 and over the years held various positions, including as treasurer, chief financial officer and, since 2010, chief operating officer. He has long been a close associate of Dauman’s; the two executives left Viacom for a six-year period, from 2000 to 2006, following Viacom’s acquisition of CBS.
Redstone divided the companies in 2006 and installed Dauman as chief executive that September.
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