CBS CBS Corp

   (FROM THE WALL STREET JOURNAL 2/4/16) 
   By Joe Flint and Amol Sharma 

Media mogul Sumner Redstone is stepping back from the helm of an entertainment empire that includes some of the most iconic names in American business.

Mr. Redstone has resigned as chairman of CBS Corp. and will be succeeded by Chief Executive Leslie Moonves, the company said Wednesday.

Viacom Inc. is also expected to change Mr. Redstone out of the role of executive chairman, though a final decision on the new arrangement won't be made until a board meeting on Thursday, a person familiar with the matter said. A Viacom spokesman declined to comment.

Mr. Redstone, 92 years old, has nearly 80% voting stakes in CBS and Viacom Inc. through his closely held National Amusements Inc.

The transitions in leadership at Viacom and CBS are the first major changes in Mr. Redstone's media empire since speculation over his declining health began to mount in recent years.

Mr. Redstone has been absent from recent CBS and Viacom annual meetings and earnings calls and is rarely seen in public nowadays.

He is currently embroiled in a legal battle over management of his health care with Manuela Herzer, a former companion and health-care agent for Mr. Redstone who has challenged his mental capacity.

Last month, a California judge ordered that Mr. Redstone be examined by a geriatric psychiatrist who is working on behalf of Ms. Herzer. In a legal filing by Ms. Herzer, Mr. Redstone was described as a "living ghost" unable to follow conversations.

Gabrielle Vidal, a Loeb & Loeb attorney representing Mr. Redstone, has called Ms. Herzer's claims "meritless" and a "despicable invasion of his privacy" that only proves she will "stop at nothing to pursue her personal financial agenda."

In court papers Mr. Redstone's lawyers filed in the case, Viacom Chief Executive Philippe Dauman offered testimony describing the media mogul as "engaged and attentive" during recent conversations about business. Mr. Dauman is now Mr. Redstone's primary health care agent.

Viacom shares were up 9% in after-hours trading. CBS shares were up 4% after-hours.

The changes at CBS and Viacom will mark the end of an era for Mr. Redstone, who assembled a sprawling set of media assets over six decades through gutsy deal-making, litigation and opportunism.

Mr. Redstone's rise started in the mid-1950s when he took over his family's small chain of movie theaters and aggressively expanded its holdings across the country. In 1987, he acquired Viacom, the parent of MTV and other popular TV channels. He then bought Paramount Pictures after a legendary bidding war with rival baron Barry Diller, and in 1999 he merged Viacom with CBS. In 2006, frustrated with Viacom's stagnant stock price, he split the companies up and named himself chairman of both.

The change inside Mr. Redstone's empire comes as his media companies are trying to come to terms with a tough business environment where pay-TV cord-cutting is squeezing profits and investors are scared of a future that could be dominated by streaming media outfits like Netflix Inc.

Both companies -- or pieces of them -- could be acquisition targets when Mr. Redstone dies or if he is deemed incapacitated. At that time, his interests will pass to his grandchildren and their descendants, and a seven-person trust will manage the holdings by majority vote.

Viacom, whose major networks have suffered ratings declines, has been a source of particular anxiety on Wall Street, with shares down 30% over the past year. Last year, Viacom took a $785 million pretax charge for job cuts and write-downs on underperforming shows. CBS, whose shares fell 14% over the past year, has been viewed by investors as the stronger performer.

Mr. Moonves was nominated to succeed Mr. Redstone by the mogul's daughter, Shari Redstone, who is vice chair of CBS. She said she declined an offer to become nonexecutive chair of CBS.

In a statement Wednesday, Ms. Redstone compared Mr. Moonves with her father and said he has "clearly established himself as a creative and effective leader who understands both the challenges and the opportunities that are shaping today's media landscape."

Ms. Redstone, in a separate statement, said she doesn't believe her father's successor at Viacom should be a "Trustee of my father's trust or otherwise intertwined in Redstone family matters, but rather a leader with an independent voice." Viacom's Mr. Dauman is a member of the trust that will oversee Mr. Redstone's holding in CBS and Viacom once he dies or is incapacitated. Ms. Redstone is also on the trust.

The relationship between Ms. Redstone and Mr. Dauman has been tense for the past few years. She has expressed dissatisfaction about the direction of Viacom, say people close to her.

The leadership of Mr. Dauman at Viacom and his role in Mr. Redstone's personal life has also been cause for concern for some investors. Last year, GAMCO Investors Inc., which owns about 10% of Viacom's voting shares, chastised the company and Mr. Dauman for not being forthcoming about Mr. Redstone's health.

Last month, activist Eric Jackson of SpringOwl Asset Management leveled his own critique, arguing the company is underperforming peers.

In a statement Wednesday, SpringOwl thanked Mr. Redstone "for his service and a tremendous entrepreneurial career" and said it strongly urges Viacom to "appoint an independent director as Executive Chairman and that it not be Philippe Dauman."

Separately, a Viacom and CBS shareholder has filed a lawsuit against Mr. Dauman and the boards of both companies, arguing that they are "conflicted" because they put the Redstones before the interests of the companies. A Viacom spokesman said the suit is without merit.

Both the activist and the lawsuit complained Viacom's management team was overpaid. Viacom disclosed last month that Mr. Dauman's total compensation grew 22% in fiscal 2015 to $54.2 million, despite the drop in the share price. Part of the increase was from stock awards that were tied to the renewal of his contract.

(END) Dow Jones Newswires

February 04, 2016 02:47 ET (07:47 GMT)

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