Viacom Says Sumner Redstone’s Bylaw Changes May Hurt Shares

  • Paramount stake sale could enhance value, media giant says
  • Dauman court victory could invalidate bylaw alterations

Viacom Inc. said a bylaw change submitted by controlling shareholder Sumner Redstone, limiting deals involving the Paramount Pictures unit, could have a negative effect on its share price and may eventually be declared invalid by the courts.

Redstone, through his National Amusements Inc. holding company, told Viacom this week that its board would now need to unanimously approve all transactions involving the Paramount Pictures studio. That could hamper Viacom’s efforts to better reflect its value by exploring a sale of a stake in the studio, the media company said Friday in a filing.

Redstone, through a spokesman, has said he’s skeptical about the logic of selling a stake in Paramount, one of the poorest-faring of Hollywood’s big studios. Viacom Chief Executive Officer Philippe Dauman has pushed for a Paramount deal, saying Thursday that selling a 49 percent stake could add $10 a share in value or more.

Shares of Viacom, which also owns cable networks like MTV and Comedy Central, dropped 3.5 percent to $42.84 at 9:39 a.m. Friday in New York. They had risen 7.9 percent this year through Thursday, buoyed by Redstone’s reassertion of authority over the company through his lawyers.

Redstone is a member of Viacom’s board, so the bylaw changes would let him block a sale. His daughter Shari Redstone is also a Viacom director and has vowed to honor her father’s wishes. Viacom is pursuing the Paramount transaction despite their opposition because it argues that Redstone, 93, no longer has the capacity to make such an important business decision and is being influenced by his daughter.

Viacom said Friday it will file documents with regulators reflecting the changes National Amusements has submitted, but it warned that the alterations could be determined to be void depending on court decisions. Dauman and another board member, George Abrams, have challenged their removal from Redstone’s trust last month, filing a complaint in probate court in Norfolk County, Massachusetts. They’re seeking to prove that they were kicked out because of Redstone’s incapacity. A decision in that case could affect the validity of the bylaw changes, Viacom said.

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