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By Keach Hagey 

Eric Jackson, the activist investor who began pushing on Tuesday for a new board and management at Viacom, is well aware that Sumner Redstone's overwhelming control of the company makes his quest quixotic at best.

Mr. Redstone, Viacom's executive chairman, controls roughly 80% of the voting power at the company, making a proxy fight impossible to win. Mr. Jackson's SpringOwl Asset Management didn't disclose its exact position in Viacom's class B nonvoting shares, but with $300 million in assets under management, it likely can only afford a small stake in the $16 billion company.

Nevertheless, Mr. Jackson invested in writing up a scathing 99-page critique of the company's governance and management--complete with multiple shots from "Weekend at Bernie's" referencing speculation over Mr. Redstone's health and succession plans--in hopes that the board and management might take some of his ideas.

"With the existing shareholders, there's frustration with the current management team and the current board," Mr. Jackson said in an interview, adding that he found it hard to entice prospective shareholders to sign onto his vision for potential upside because of the existence of the controlling shareholder.

There is some evidence that the market at least likes hearing such calls for change. Viacom's stock closed up almost 5% on Tuesday--a day when the market and other media peers were relatively flat.

"There is always this risk in this situation with a controlling shareholder that calls for change will go unheeded," Mr. Jackson said. "However, we still believe this is a good investment because we believe it's tremendously discounted at these levels."

As Mr. Jackson notes in his report, Viacom lost nearly half of its value last year and has chronically underperformed against its peers over the last five years, even as its executives and board are some of the highest paid in the industry. He argues that all of the hits for which Viacom is best known were developed before Mr. Dauman took the reins in 2006, and that the company has failed to make digital acquisitions even as its peers invested in new media startups.

His prescription is drastic, including a new chairman, CEO, board and leadership; the exploration of a potential merger with AMC and investment in Paramount from Alibaba or Amazon; "massive" operating expense reductions; the launch of new over-the-top streaming products; and a retooled creative culture.

If some of these ideas sound familiar, there's a reason. Mr. Jackson said he's supportive of the ideas that Mario Gabelli, the largest shareholder of Viacom voting stock outside the Redstone family, has put forth in recent weeks about potential deals with Alibaba or AMC, as well as his calls for more transparency on the health of the 92-year-old Mr. Redstone. In his report, he suggests Mr. Gabelli might make a good board member. Mr. Gabelli didn't reply to request for comment on the matter.

"Viacom's board and management are completely focused on delivering long-term value to shareholders," a Viacom spokesman said in a statement. "We are looking to the future and the opportunities ahead. We are encouraged by the growth in our strong international business, the ratings upswings at most of our networks, Paramount's strong start in 2016, our leadership position in advertising technology and other positive recent developments."

This isn't the first high-profile act of media activism for SpringOwl--nor the last.

SpringOwl sent another 99-page presentation to Yahoo's board last year detailing plans to turn around the struggling company by slimming it down and focusing more on sports and finance.

Mr. Jackson said he is now working on a similar presentation regarding Time Warner Inc., which has been the subject of rampant speculation about activist activity in recent weeks. While SpringOwl hasn't yet invested in the media stock, Mr. Jackson said SpringOwl is weighing doing so.

"We think the stock is extremely interesting, and we think there are a number of ways that value can be unlocked there," Mr. Jackson said of Time Warner. "We think it will be unlocked there as the year goes on."

Time Warner declined to comment.

David Benoit contributed to this article.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

January 19, 2016 18:28 ET (23:28 GMT)

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