Viacom shares closed up 6.8% following the announcement.
The company said that it will challenge the decision at the Chancery Court in Delaware, where Viacom is incorporated. Dauman asked a Massachusetts court to find that Redstone, 93, is not competent to manage his affairs — and is being manipulated by his daughter, Shari, who’s President of National Amusements and Vice Chair of Viacom and CBS.
Viacom will seek an “expedited determination [in Delaware] that Ms. Redstone’s attempted removal and replacement of Viacom directors is invalid,” Lead Independent Director Frederic Salerno says.
He calls today’s announcement “a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom and its management in disregard of Sumner Redstone’s wishes and to undermine the current Board’s ability to represent the best interests of all of the stockholders of Viacom.”
The theater chain says that it preemptively filed papers at the Delaware Chancery Court “to affirm the validity and effectiveness of these actions.” That would keep the existing board temporarily in place, but bar it from making decisions outside the normal course of business.
“Typically, such cases are given priority by the Delaware courts and resolved far more quickly than other cases,” National Amusements says. Still, it likely would scuttle Dauman’s effort to sell a 49% stake in Paramount.
The exhibition chain controls 80% of Viacom’s voting shares, which gives it broad authority under the bylaws to determine who sits on the board.
Assuming the decision stands, Dauman, George Abrams, Blythe McGarvie, Frederic Salerno and William Schwartz will be off the board.
They would be replaced by Buzzfeed Chairman Kenneth Lerer, who co-founded The Huffington Post; Eversource Energy Chairman Thomas May; former Discovery Communications CEO Judith McHale; Avis Budget Group Executive Chairman Ronald Nelson, a former Co-COO of Dreamworks SKG; and former Sony Entertainment President Nicole Seligman.
Existing directors who would remain on the board include COO Thomas Dooley — Dauman’s long-time business partner — as well as Cristiana Falcone Sorrell, Inside Edition anchor Deborah Norville, Charles Phillips, Jr., Shari Redstone, and Sumner Redstone.
National Amusements says, in a statement, that its new board picks “have deep experience in corporate governance of public companies and will provide valuable expertise to Viacom in the areas of media, entertainment and technology. None of the new directors is affiliated with National Amusements, Viacom or any Redstone family trust.”
Here’s Salerno’s full response:
Today Viacom received notice from National Amusements, Inc. that purports to remove Viacom directors and replace them with new directors, subject to a ruling by the Delaware Court. This is a brazen and demonstrably invalid attempt by Ms. Redstone to gain control of Viacom and its management in disregard of Sumner Redstone’s wishes and to undermine the current Board’s ability to represent the best interests of all of the stockholders of Viacom.”
With the support of the independent directors of the Board, I am filing today a lawsuit in Delaware Chancery Court seeking an expedited determination that Ms. Redstone’s attempted removal and replacement of Viacom directors is invalid and that the directors elected at the 2016 Annual Meeting continue to serve. I am also seeking an expedited hearing, expedited discovery and an order of the court to maintain the status quo pending resolution of the litigation.
Mr. Redstone established and maintained for decades a clear estate plan for the governance of Viacom upon his death or incapacity – based on independent control and professional management of Viacom going forward. He said repeatedly that the Board will be responsible for making decisions about governance, leadership and succession, and he hand-selected a group of trusted advisors and independent directors to fulfill this role.
Sadly, it is now clear that Mr. Redstone is being manipulated and used by his daughter in an attempt to accomplish her long-held goal of gaining complete control of Viacom.