Viacom expects weak 3Q but chance of CEO change buoys shares

Viacom CEO Philippe Dauman hopes that National Amusements’ move yesterday to replace five Viacom directors will light a fire under the MA judge weighing a case about Sumner Redstone’s competence.

The announcement came hours after Sumner Redstone’s National Amusements Inc, which has 80 percent control of Viacom, announced the removal of Dauman and four of his allies on the board of directors.

Dauman and Abrams allege that the 93-year-old Redstone is ailing and acting under the “undue influence” of his daughter, Shari Redstone.

In May, Mr Dauman and board member George Abrams were removed as directors of National Amusements.

“On the very day that Mr. Redstone’s representatives acted to remove Mr. Dauman and Mr. Abrams, they made it clear the issue was about control of Viacom”.

The two plaintiffs say that Shari Redstone is “isolating” her ailing father, and have called for Sumner Redstone to submit to an immediate medical examination.

Newly appointed Viacom board members include Buzzfeed Chairman Kenneth Lerer, Everforce Energy Chairman Thomas May, Cane Investments CEO Judith McHale, Avis Budget Group Chairman Ronald Nelson and former Sony Entertainment President Nicole Seligman.

National Amusements’ decision to keep the current board in place until the DE court rules could pay off because it presents the court with a less volatile situation, said Lawrence Hamermesh, a professor at Widener University School of Law in Delaware.

Meanwhile, Matthew Harrigan of Wunderlich Securities predicts that the Redstones will prevail in any legal challenge to the ousting of Viacom board members.

“Specifically, there has been a purported takeover of Viacom through supposed corporate action by NAI and litigation in DE”, their court documents state, referring to NAI’s move Thursday to ask a DE court to affirm its removal of the five Viacom directors.

Viacom shares jumped almost 7 per cent Thursday.

Viacom said that it expects domestic ad sales declines for the third quarter to be approximately 4%. It‚à ” ôs the latest move to reassert control even as lawyers battle over whether Redstone is mentally competent to run the multibillion-dollar media companies Viacom and CBS.

Despite that, Dauman is moving forward with a sale, which he said would add $10 to Viacom’s stock price.

The drama and confusion about who is in control at Viacom marks a stunning example of the tumult that can ensue in family-controlled companies when business titans don’t activate succession plans while they are in their prime. “Therefore, we would also expect more newsflow around executive changes and other strategic initiatives, which could all be contingent on the DE court’s approval”.