Redstone, 92 and in poor health, unexpectedly resigned as executive
chairman of CBS on Wednesday, and Viacom said its directors would
meet the next day, without saying what they would discuss.
Redstone's decision to become chairman emeritus at CBS was seen as
the beginning of a new phase at two famous media companies under
pressure from investors. CBS owns Showtime as well as the eponymous
television channel, while Viacom is home to movie studio Paramount
and television channel MTV, among others.
Investors said that they expected Redstone to stand down at Viacom,
Daughter Shari Redstone said that both companies needed an
"independent voice" as chair who was not involved in her family's
personal matters or on her father's trust. That excluded herself and
fellow trust member Dauman.
CBS said Redstone would be replaced by Leslie Moonves, its president
and chief executive since 2006.
Shares of CBS Corp were up 4.6 percent in after-hours market
trading, while those of Viacom Inc rose 10 percent. Viacom shares
are down by a third in the last year and CBS shares are down 15
Billionaire Redstone created a media empire nearly from scratch and
was the dominating force until recently, clearly in control at
shareholder meetings and on conference calls.
One of the last remaining colorful executives, who claimed to swim
naked every day and was always surrounded by young beautiful women,
Redstone said more than once that he would never die. But in recent
months he has faded from view, and a lawsuit by a former girlfriend
has challenged his mental competence.
Sal Muoio, whose investment firm is one of the largest owners of
voting shares of Viacom outside the Redstone family, said Redstone
was widely expected to resign at Viacom.
"It's for the best. It's too much distraction. It's time to move
on," he said.
Redstone's former girlfriend, Manuela Herzer, challenged his mental
competency in a lawsuit in November.
As part of that legal fight, Redstone underwent a mental examination
last Friday by a psychiatrist hired by Herzer. The results of that
test have not been made public.
Herzerís attorneys could potentially use the psychiatrist's
conclusions to argue that her lawsuit should not be dismissed. A Los
Angeles judge is set to make a decision on Feb. 29.
CBS' move effectively cements Moonves' control of company
management, according to one investor, although Redstone remains the
"(Redstoneís) role has been diminished for some time and Les Moonves
has been the guy running the company," said Stephen Massocca, chief
investment officer at Wedbush Equity Management LLC in San
Francisco, a hedge fund that does not own CBS or Viacom stock.
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Redstone controls about 80 percent of the voting shares in Viacom
and CBS through a holding company.
CBS said that, before electing Moonves, its board offered the
position of non-executive chair to Redstone's daughter, Shari
Redstone, but she declined.
Shari Redstone confirmed she declined the offer and congratulated
Moonves on his new role.
"It is my firm belief that whoever may succeed my father as Chair at
each company should be someone who is not a Trustee of my fatherís
trust or otherwise intertwined in Redstone family matters, but
rather a leader with an independent voice," she said in an emailed
statement. "I was honored to nominate Les as the CBS Chair and am
delighted to congratulate him on his new position."
Dauman is a long-trusted lieutenant to Redstone, who still holds the
controlling stake in Viacom, even though some outside shareholders
Activist investor Eric Jackson at SpringOwl Asset Management, which
owns a relatively small amount of Viacom stock, told Reuters that he
expected Redstone would resign at Viacom: "The next wish list item
for us is a new CEO at Viacom."
Viacom said last month that it cut Redstone's total pay by 85
percent last year. Viacom in the past described Redstone as a key
player in strategic development and board oversight, but in its
latest proxy attributed no duties to its executive chairman and said
Redstone's pay cut was due to "reduced responsibilities," without
giving further details.
While long expected, the resignation's abruptness came as a
surprise. A source close to the matter said Redstone notified
Moonves and the board in a letter on Tuesday.
(Reporting by Anya George Tharakan in Bengaluru, Jessica Toonkel and
Jennifer Ablan in New York, Lisa Richwine in Los Angeles and Dan
Levine and Noel Randewich in San Francisco; Writing by Bill Rigby
and Peter Henderson; Editing by Savio D'Souza, Robin Paxton and
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