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Viacom to Undergo Major Board Reshuffling; Stock Gains 7%
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Viacom Inc. has been involved in a mega corporate drama over the past few months. In a major turn of events, National Amusements Incorporated (“NIA”), the company which controls both Viacom and CBS Corporation, recently announced that majority owner and Chairman, Sumner Redstone has decided to replace five board members. Viacom’s current CEO too is on the list of board members to be removed. To this end, NIA has filed papers in the Delaware Court of Chancery to obtain the required approval. Mr. Frederic Salerno, the lead independent director, has filed a lawsuit against this decision.
The stock market however seems to be appreciating the announcement with the stock gaining almost 7% at $45.05 per share.
For now, NIA has requested the count to retain the current board till the final approval for the new board is received. The court has also been requested to prohibit the current board from taking any unusual or important decisions during this period. The proposed board will likely comprise Buzzfeed Chairman Kenneth Lerer, ex-CEO of Discovery Communications Judith McHale, former DreamWorks SKG co-COO Ronald Nelson and ex-President of Sony Entertainment, Nicole Seligman.
Giant media conglomerate, Viacom, was founded by Sumner Redstone more than thirty years ago. He has seen the company’s transformation from being a market leader to struggling with new web based services. Redstone has been unwell for almost two years now and at the age of 93 his health is a major concern. In such circumstances, his media empire has become one of the corporate world’s most complicated succession battles involving his daughter Shari Redstone and some of the top leaders of the company including the CEO, Philip Dauman.
According to the accusations by Dauman and his supporters, Sumner Redstone is no longer fit to take major corporate decisions. They also accused Shari Redstone of influencing and manipulating her father to serve her personal interests. Dauman and a board member, George Abrams, were also removed from the family’s trust, which takes key decisions, last month. They had filed a court case in this regard too. However, Sumner Redstone’s lack of trust in the current board and the CEO poses to be a major setback for all those opposing Shari Redstone.
Stockholder Reactions
The legal complexities surrounding Viacom have definitely not gone down well with stockholders. The company had been facing various issues regarding profitability and competitiveness from new web-based entertainment sources such as Netflix, Inc (NFLX - Free Report) ) . The addition of corporate governance to the list of issues has further dismayed investors. Dauman too has been criticized for failing to revive the viewership levels of some of Viacom’s major TV networks such as Comedy Central, MTV and Nickelodean. Dauman has also been speculated to be responsible for some high-level executive exits at the company, which adversely impacted its business. Viacom’s shareholders have reacted positively to the news of the board being reshuffled and the possibility of Dauman stepping down from his position. The company’s shares gained 7% on Thursday but were still trading 49% below the all-time high of $88.90 reached in Mar 2014.
Given the string of impending lawsuits, Viacom will have to implement several major changes over the coming few months. Also, it remains to be seen how the company’s future leadership will deal with challenges from new entertainment sources and improve the Viacom brand name.
Zacks Rank and Key Stock Picks
Viacom currently carries a Zacks Rank #3 (Hold). Investors interested in the consumer entertainment sector may also consider stocks like Cable One Inc. (CABO - Free Report) and Cablevision Systems Corporation . Both these stocks hold a Zacks Rank #1 (Strong Buy).
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Viacom to Undergo Major Board Reshuffling; Stock Gains 7%
Viacom Inc. has been involved in a mega corporate drama over the past few months. In a major turn of events, National Amusements Incorporated (“NIA”), the company which controls both Viacom and CBS Corporation, recently announced that majority owner and Chairman, Sumner Redstone has decided to replace five board members. Viacom’s current CEO too is on the list of board members to be removed. To this end, NIA has filed papers in the Delaware Court of Chancery to obtain the required approval. Mr. Frederic Salerno, the lead independent director, has filed a lawsuit against this decision.
The stock market however seems to be appreciating the announcement with the stock gaining almost 7% at $45.05 per share.
For now, NIA has requested the count to retain the current board till the final approval for the new board is received. The court has also been requested to prohibit the current board from taking any unusual or important decisions during this period. The proposed board will likely comprise Buzzfeed Chairman Kenneth Lerer, ex-CEO of Discovery Communications Judith McHale, former DreamWorks SKG co-COO Ronald Nelson and ex-President of Sony Entertainment, Nicole Seligman.
VIACOM INC-B Price
VIACOM INC-B Price | VIACOM INC-B Quote
Corporate Battle Behind the Board Reshuffle
Giant media conglomerate, Viacom, was founded by Sumner Redstone more than thirty years ago. He has seen the company’s transformation from being a market leader to struggling with new web based services. Redstone has been unwell for almost two years now and at the age of 93 his health is a major concern. In such circumstances, his media empire has become one of the corporate world’s most complicated succession battles involving his daughter Shari Redstone and some of the top leaders of the company including the CEO, Philip Dauman.
According to the accusations by Dauman and his supporters, Sumner Redstone is no longer fit to take major corporate decisions. They also accused Shari Redstone of influencing and manipulating her father to serve her personal interests. Dauman and a board member, George Abrams, were also removed from the family’s trust, which takes key decisions, last month. They had filed a court case in this regard too. However, Sumner Redstone’s lack of trust in the current board and the CEO poses to be a major setback for all those opposing Shari Redstone.
Stockholder Reactions
The legal complexities surrounding Viacom have definitely not gone down well with stockholders. The company had been facing various issues regarding profitability and competitiveness from new web-based entertainment sources such as Netflix, Inc (NFLX - Free Report) ) . The addition of corporate governance to the list of issues has further dismayed investors. Dauman too has been criticized for failing to revive the viewership levels of some of Viacom’s major TV networks such as Comedy Central, MTV and Nickelodean. Dauman has also been speculated to be responsible for some high-level executive exits at the company, which adversely impacted its business. Viacom’s shareholders have reacted positively to the news of the board being reshuffled and the possibility of Dauman stepping down from his position. The company’s shares gained 7% on Thursday but were still trading 49% below the all-time high of $88.90 reached in Mar 2014.
Given the string of impending lawsuits, Viacom will have to implement several major changes over the coming few months. Also, it remains to be seen how the company’s future leadership will deal with challenges from new entertainment sources and improve the Viacom brand name.
Zacks Rank and Key Stock Picks
Viacom currently carries a Zacks Rank #3 (Hold). Investors interested in the consumer entertainment sector may also consider stocks like Cable One Inc. (CABO - Free Report) and Cablevision Systems Corporation . Both these stocks hold a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>