NEW YORK/SAN FRANCISCO Sumner Redstone removed five of Viacom Inc's (VIAB.O) directors, including Chief Executive Philippe Dauman, from the board of the media company he controls on Thursday, ramping up the stakes in the battle over the future of his $40 billion media empire.
Dauman remains CEO, and he and the board will stay in place until a Delaware court affirms the changes, but it could be a prelude to the 93-year-old media mogul forcing Dauman out of the company entirely.
Viacom's independent lead director Fred Salerno, one of the board members Redstone removed, shot back shortly after, saying he would file a lawsuit on Thursday in the same Delaware court to block the move, calling it "invalid" and the result of Redstone's daughter Shari manipulating her father.
Viacom's shares jumped after Reuters first reported Redstone's move, ending the session up 6.7 percent. Shares of CBS Corp (CBS.N), also majority-owned by Redstone, closed up 2.4 percent.
Redstone's privately held movie holding company, National Amusements, which owns 80 percent of voting shares of Viacom and CBS, filed with a Delaware court to approve that the changes are legal.
Viacom’s corporate charter gives National Amusements the power to immediately remove Viacom’s board at any time under Delaware law, which means the ousted directors have a difficult battle ahead.
National Amusements said it removed Dauman, George Abrams, William Schwartz, Blythe McGarvie and lead independent director Salerno.
It said it replaced the directors with Kenneth Lerer, a venture capitalist and co-founder of the Huffington Post and chairman of BuzzFeed; Nicole Seligman, a former Sony Corp executive, Judith McHale, the former head of Discovery Communications who was general counsel for MTV Networks; Thomas May, the chairman of Eversource Energy utility company and Ron Nelson, chairman and CEO of Avis Budget Group who used to work at DreamWorks and Paramount.
Redstone said on May 27 that he was considering removing Dauman and the board, citing dissatisfaction with the struggling company's strategy that includes a sale of a minority stake in Paramount Pictures.
At that time, Viacom's independent directors characterized such a move as "legally flawed" and said they would contest their ouster.
Salerno went further on Thursday, saying the attempt to remove the directors was "a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom and its management in disregard of Sumner Redstone’s wishes," referring to Redstone's daughter Shari.
Shari Redstone was not immediately available to comment.
National Amusements also filed papers in a Delaware court asking it to prohibit the Viacom board from "taking any action outside of the ordinary course of business," the company said.
Viacom's six other board members, which include Viacom Chief Operating Officer Thomas Dooley, remain on the board.
The fight over Redstone's empire has spilled into courtrooms on both coasts. At issue is whether the elderly billionaire, who has trouble speaking and has limited mobility, is calling the shots or being manipulated by family members who want to wrest control of Viacom from Dauman.
Redstone has already exercised his controlling interest to remove Dauman and Abrams from his family trust and the board of National Amusements. National Amusements has changed the Viacom's bylaws to require unanimous approval of any sale related to Paramount.
Dauman has contested his ouster from the trust and the board of National Amusements in a Massachusetts lawsuit. He contends that Shari Redstone is manipulating her father, who is not mentally competent, according to court documents. Shari Redstone has called those claims absurd.
Over the past few weeks, Viacom's lead independent director, Salerno, has requested a face-to-face meeting with Redstone and warned of further court battles if the media tycoon remains inaccessible to the board.
On Wednesday, Redstone responded through a spokesman that he "no longer trusts" Dauman to act in the company's best interests.
(Reporting by Jessica Toonkel and Dan Levine; Editing by Bill Rigby)
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Published Date: Jun 17, 2016 03:00 am | Updated Date: Jun 17, 2016 03:00 am