Viacom Warns of Profit Shortfall, to Pay CEO's Legal Fees--4th Update
June 17 2016 - 07:31PM
Dow Jones News
By Austen Hufford
Viacom Inc. said Friday its profit for the current quarter could
fall well short of expectations, a gloomy outlook that comes as the
media company is in the throes of a messy legal battle over its
corporate governance.
Viacom blamed the shortcoming on weak results for the latest
"Teenage Mutant Ninja Turtles" movie and a delay in a
video-on-demand licensing deal, caused in part by the company's
turmoil.
The owner of Paramount Pictures and cable channels like MTV and
Comedy Central now expects per-share earnings between $1 and $1.05
for the quarter ending June 30, compared with an average analyst
estimate of $1.38, according to Thomson Reuters.
Viacom's future hangs in the balance as a battle plays out
between the company's board and its controlling shareholder,
93-year-old Sumner Redstone.
National Amusements Inc., the holding company through which Mr.
Redstone controls Viacom, is seeking to oust five board members,
including Chairman and CEO Philippe Dauman. A Delaware court will
decide whether that overhaul will be allowed.
Investors can only hope that an end to the power struggle will
yield a clearer plan for reversing Viacom's weak performance in a
media industry nagged by cable TV woes and an uncertain ad market.
Regardless of who winds up in control, they will have their hands
full trying to increase ratings at Viacom's major networks, turn
around the studio and attract top talent.
Soft network viewership cuts into ad sales, which Viacom expects
to fall about 4% domestically in the current quarter compared to
the same period last year.
The latest "Teenage Mutant Ninja Turtles" movie underperformed
domestically, Viacom said. The movie garnered an estimated $35.3
million in its debut in the U.S. and Canada, while the first movie
in the franchise opened to $65.6 million.
Viacom has been looking to sell a minority stake in Paramount,
but Mr. Redstone has signaled in statements through his spokesman
that he isn't in favor of such a transaction. And National
Amusements recently overhauled Viacom's bylaws to require unanimous
board approval of any such deal.
Viacom said it had expected to sign a "significant"
video-on-demand agreement in the quarter, but the "public
governance controversy" interfered and as a result no deal was
struck in the quarter. Further details about the pact weren't
available.
Viacom's Class B shares, down 33% over the past year, fell 1.4%
to $44.42 on Friday.
Separately, Viacom on Friday said it would pay legal expenses of
Mr. Dauman and board member George Abrams. They have filed a suit
-- apart from the one over the ouster of board members -- in a
Massachusetts court contesting their removal from the trust that
will oversee Mr. Redstone's holdings in Viacom and CBS Corp. after
he dies or is incapacitated.
They have claimed Mr. Redstone doesn't have the mental capacity
to make big changes to his empire, and have alleged that his
daughter Shari Redstone is pulling the strings. She denies the
charge.
Viacom said it will cover the attorney's fees, witness fees and
public relations costs for Messrs. Dauman and Abrams. Under the
agreements, they would have to repay Viacom if either is found to
have acted in breach of his fiduciary duties or in a manner not in
the best interest of the company.
In a statement, National Amusements said "there is no
justification for Viacom to use company dollars to fund Dauman's
and George Abrams' unfounded attack on Redstone's lawful decision
to remove them as trustees from Redstone's trust, especially in
light of Viacom's announcement that its fiscal third-quarter
earnings will fall short of estimates."
Viacom said the agreements were approved by a committee of
independent members of the board.
Write to Austen Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
June 17, 2016 19:16 ET (23:16 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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