Viacom saga comes to end with Redstones emerging victorious

Bloomberg

Viacom Inc.’s controlling shareholders Sumner Redstone and Shari Redstone emerged victorious in a months-long legal battle to oust Chief Executive Officer Philippe Dauman, reaching a settlement that will see him leave the company with a $72 million severance package.
Dauman will become non-executive chairman until Sept. 13, giving him an opportunity to present to the board a proposal to sell a 49 percent stake in Paramount Pictures. The Paramount deal has been a cornerstone of his efforts to reduce Viacom’s debt and revive flagging sales and profit. Yet any accord must now have unanimous backing of the board, terms that cement the Redstones’ veto power.
Chief Operating Officer Tom Dooley will serve as interim CEO through at least Sept. 30, according a memo Dooley sent to staff on Friday. Dooley could become the permanent boss of the media company, according to people familiar with the matter, who asked not to be identified. He plans to work with the board on succession, according to the memo.
The settlement is a near-complete win for the Redstones — the 93-year-old billionaire and his daughter Shari. They control an 80 percent voting stake in Viacom through their private theater chain National Amusements Inc. Redstone and his daughter have been fighting to remove Dauman and fellow board member George Abrams from the company and a trust that will govern the family’s holdings in Viacom and CBS Corp. after Sumner’s death.
Dauman, Abrams and lead independent director Fred Salerno had been contesting Redstone’s moves in Delaware and Massachusetts courts, challenging his mental competence and alleging he is being unduly influenced by Shari Redstone. The battle has disrupted business for the struggling New York-based media company, hobbling its efforts to sell a stake in Paramount and reach deals to stream programs on the internet.

New Members
As part of the accord, Viacom’s board will expand with Redstone’s five new appointees, including venture capitalist Kenneth Lerer and former Sony Corp. of America President Nicole Seligman. Three existing directors will leave after the next board meeting, according to people with knowledge of the matter. Thomas May, one of the new appointees, is expected to become chairman, said one of the people, who asked not to be identified because the decision isn’t public.
Redstone appointees will also assume leadership positions on the company’s audit and compensation committee, the people said.
Neither Dauman nor Abrams will serve on the Redstone family trust, according to the people. Keryn Redstone, Sumner’s granddaughter, said Thursday she will review the settlement and decide whether to continue with her own lawsuit challenging his mental competence.
The deal ends a decades-long business relationship between the elder Redstone and Dauman, a corporate attorney who advised Sumner on many of his biggest deals, including the acquisitions of Viacom, Paramount and CBS Corp. For years Redstone introduced Dauman on company conference calls as the wisest man he’d ever known.
The relationship soured this year, after Dauman replaced his mentor as chairman of Viacom and the board eliminated Redstone’s remaining pay. Dauman’s decision to sell a stake in Paramount angered Redstone, who fought a bruising battle to acquire the studio two decades ago. Sumner and his daughter then moved to unseat Dauman from the board and from their family’s business affairs.

Board Focus
With Dauman gone, the focus of the board and management will shift to tough decisions facing Viacom. The first order of business will be deciding if the company should continue to seek a buyer for a minority stake in Paramount. Also on tap is whether to seek a permanent chief executive to replace Dooley or give the longtime Viacom executive a chance to prove himself in the new role.
The settlement also paves the way for the Redstones to pursue merger options for Viacom, including a potential recombination with CBS Corp., where National Amusements also holds an 80 percent voting stake. A marriage of the two companies, which were split a decade ago, could add clout in negotiating deals with cable TV distributors.