February 3, 2016 / 9:19 PM / in 2 years

Redstone seen resigning as Viacom chair after stepping down at CBS

NEW YORK/LOS ANGELES (Reuters) - Viacom’s board appears poised to replace Sumner Redstone as chairman on Thursday, after the aging mogul stepped down from his executive role at the top of CBS, but it was not apparent who would get his job at Viacom as Redstone’s daughter made clear she did not want CEO Philippe Dauman to succeed her father.

Les Moonves and Sumner Redstone. REUTERS/Files

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, too.

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 percent.

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.

Herzer’s 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 controlling shareholder.

“(Redstone’s) 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.

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 father’s 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 want change.

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 Andrew Hay

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