Viacom Says Bylaw Changes To Thwart A Paramount Deal May Be Invalid


Viacom begrudgingly published in an SEC filing this morning what it calls “purported” changes to its bylaws from controlling shareholder National Amusements designed to slow or stop an effort to sell 49% of Paramount to a strategic investor.

But the document also contends that the changes from the Sumner Redstone-controlled theater chain — which owns 80% of Viacom’s voting stock — “may be determined to be invalid and void.”

CEO Philippe Dauman and director George Abrams want a Massachusetts court to find that Redstone, 93, can’t manage his own affairs. That could upset any decision made by National Amusements, the company says.

The filing formally notifies shareholders about the new bylaws that the exhibition company announced this week. They would require unanimous approval by the Viacom board for any deal involving Paramount’s ownership.

As a practical matter, that would thwart Dauman’s effort to sell a 49% stake in the studio. Redstone and his daughter Shari — who’s President of National Amusements and Vice Chair of Viacom — are on the board and have opposed a Paramount deal.

Dauman told an investor gathering yesterday that he’s closing in on an arrangement that might boost Viacom’s value by about $10 a share. Due to the dispute with National Amusements, though, he would not meet his target to close by the end of this month.

Today’s SEC filing says that, although the National Amusements proposal calls for unanimous board approval, “other statements purportedly made by Sumner Redstone and his representatives have indicated that there is no interest in selling any interest in Paramount. Moreover, conduct in which Ms. Redstone has engaged as a Viacom director appears to confirm that lack of interest.”

If they prevail, the filing adds, then it would “have an adverse effect on the ability of the Company to assess fully the extent to which potential investors would be interested in making a value-enhancing investment in Paramount.”

Earlier this week National Amusements said it is “not opposed to a transaction that would unlock value at Paramount.” But any deal would have to be “thoroughly vetted and approved by Viacom’s full Board, and the rationale for such a transaction should be clearly articulated to Viacom’s stockholders in advance.”

It added that any deal to sell a “key asset …must be part of a carefully constructed long-term strategy; it is not an end in and of itself.”

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