Sumner Redstone made two moves Monday to consolidate his hold over Viacom and to make it more difficult for the conglomerate’s CEO and board to move ahead with a proposed sale of a stake in Paramount Pictures.
Redstone altered the Viacom corporate bylaws to require a unanimous vote of the board to sell all or part of Paramount. That and other alterations of the Viacom bylaws are designed, an announcement said, to “protect the long-term interests of all Viacom stockholders.”
The alteration requiring a unanimous voted of Viacom’s board to sell a portion of Paramount effectively kills a deal, because the 93-year-old Redstone has made clear he is not ready to sell. The announcement Monday showed Redstone’s camp to be girding for additional fights to come — by ordering that additional changes to the bylaws can come only via a unanimous vote of the Viacom board, giving Redstone additional veto power.
Viacom issued a statement Monday calling the moves “illegitimate” and saying they “stem directly from the invalid changes made to the National Amusements, Inc. board and are completely at odds with good corporate governance.” The Viacom statement added: “They are clearly intended to impede the ability of the Viacom Board of Directors to fulfill its obligations to all stockholders, including the public non-controlling stockholders who own 90% of the equity of Viacom.”
Redstone’s team accomplished the changes through his holding company, National Amusements, which controls nearly 80% of the voting shares in Viacom. The board of National Amusemtns “unanimously ratified” the moves, the announcement said.
“While National Amusements is not opposed to a transaction that would unlock value at Paramount, it firmly believes that any proposed transaction should 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,” the announcement said. “National Amusements believes that any disposition of a key asset of Viacom must be part of a carefully constructed long-term strategy; it is not an end in and of itself.”
The action by Redstone, also said that any other bylaw modifications made since Sept. 15, 2011, will be reversed and that additional alterations were made so that the Delaware Chancery Court no longer has exclusive jurisdiction over litigation involving the corporation.
The latest action also questioned the actions of independent directors, including Fred Salerno, who have said they would fight to maintain their positions on the board, if individuals who say they represent Redstone try to remove them. Their statements “indicate that the principal focus of the independent directors is on preserving their own positions and those of Viacom’s management team rather than on exercising their fiduciary duty to promote the long-term interests of all Viacom stockholders,” the statement from Redstone’s camp contends.
Redstone’s representatives said his voting control of the company gives him the power to make such changes “without a meeting, without prior notice and without a vote.” The announcement explains Redstone’s authority this way: “Article II, Section 10 of Viacom’s corporate bylaws explicitly provides National Amusements, as the owner of a majority of the Company’s Class A (voting) common stock, with the right to take such action ‘without a meeting, without prior notice and without a vote’ by Viacom stockholders. National Amusements, directly and through subsidiaries, holds approximately 79.8% of the Class A (voting) common stock of Viacom, constituting 10% of the overall equity of the Company.”