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Top Viacom Shareholder Shows Dauman the Door

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Viacom Inc. President and Chief Executive Officer Philippe Dauman was recently booted out of a trust set aside by the Viacom’s largest stock shareholder, Sumner Redstone

Viacom is the world’s sixth largest broadcasting and cable company, currently based in New York City. Comprised of BET, Viacom Media Networks, and Paramount Pictures, it owns 170 networks total, including CBS, MTV, Comedy Central and Nickelodeon. It recently released the movie Teenage Mutant Ninja Turtles: Out of the Shadows, through Paramount Movie Studios. But the drama behind the scenes for control of the company is every bit as involving as anything the $40 billion media company has seen released on the big or small screen.

On one side is Viacom Chief Executive Philippe Dauman, who was recently booted out of a trust set aside by the Viacom’s largest stock shareholder, Sumner Redstone. Mr. Redstone owns National Amusements Inc, which controls almost 80% of the voting shares of both Viacom and CBS. Philipe Dauman has taken Redstone to court, alleging that the 93-year-old media magnate is not mentally competent to make decisions, and that his daughter is manipulating her father’s decision to remove him from not only the trust but the board of National Amusements Inc.

Entirely on the other side is Sumner Redstone’s daughter, Shari Redstone, who is opposed to either Philipe Dauman or a fellow board member named George Abrams being a part of her family’s business.

As one highly placed executive who wished to remain anonymous put it, “ He [Philipe Dauman] only has two choices: Quit or fight, and quitting is humiliating. So he is going to fight.”

As proof of their claim to be the legitimate heads of Viacom, Philipe Dauman and his associates have presented a trust document in court totaling 92 pages that they believe makes it clear that Sumer Redstone never intended for his family to remain in charge of the company, but rather allow for experts outside the family more experienced in media matters to be control.

They argue this would guarantee fair treatment of the family, which has a history of fighting each other. They claim that Sumner Redstone himself has criticized his daughter personally over the time they have known him, and would not support her actions, were he not of such advanced age.

A wildcard has been entered into this conflict in the form of a billionaire named John Malone. At a recent media business convention at Allen’s & Co. he claimed that publicity about the conflict over control of Viacom is hurting the appeal of its stocks. “They’ve got some great assets, and right at the moment because of the turmoil, they’re substantially undervalued. I think they’ll straighten it out.”

Mr. Malone is renowned for being a clever player in the media business, and his appeals managed to raise up Viacom’s shares at least 4%. This is caused some to surmise that Malone himself may be making a play for control of the company. John Malone already has investments in television and film production company Lionsgate and Starz, an online television for paying subscribers. A huge cable conglomerate like Viacom would be a sensible investment as well.

Mario Gabelli, who holds the second largest amount of stocks in Viacom spoke about John Malone’s machinations, “John Malone has an angle here. He’s clearly sucking up to Shari [Redstone.] He’s a tax strategist. He has something in mind that he’s trying to sell National Amusement Inc.”

Philipe Dauman himself has a serious amount of pressure on him to turn things around for Viacom, in addition to the legal troubles to remain in control. Viacom has not only dealt with a poor box office performance from the Teenage Mutant Ninja Turtles sequel in theaters but an overall drop of 40% in its shares over the years, as a result of unsatisfied investors.

Anat Ghelber

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