Viacom's board approved an agreement ending a months-long legal dispute between Chief Executive Officer Philippe Dauman and controlling shareholder Sumner Redstone, paving the way for Mr. Dauman to leave the company, people with knowledge of the matter said.
Chief Operating Officer Tom Dooley will serve as interim CEO through at least Sept. 30, and could become permanent boss, said the people, who asked not to be identified because the decision hasn't been announced.
The settlement is a near-complete victory for the Redstones -- the 93-year-old billionaire and his daughter Shari. They control an 80% voting stake in Viacom through their private theater chain National Amusements Inc. Mr. Redstone and his daughter have been fighting to remove Mr. Dauman and fellow board member George Abrams from the company and a trust that will govern the family's holdings in Viacom and CBS after Mr. Redstone's death.
Mr. Dauman, Mr. Abrams and lead independent director Fred Salerno had been contesting Mr. Redstone's moves in Delaware and Massachusetts courts, challenging his mental competence and alleging he is being unduly influenced by Shari Redstone. The battle has disrupted business for the struggling New York-based media company, hobbling its efforts to sell a stake in Paramount and reach deals to stream programs on the Internet.
Mr. Dauman will become non-executive chairman until Sept. 13, giving him an opportunity to present a proposal to sell a 49% stake in Paramount Pictures to the board, the people said. The Paramount deal has been a cornerstone of his efforts to revive Viacom's flagging sales and profit.
New Board Members
As part of the accord, Viacom's board will expand with Mr. Redstone's five new appointees, including venture capitalist Kenneth Lerer and former Sony Corp. of America President Nicole Seligman. Three existing directors will leave after the next board meeting, the people said. Thomas May, one of the new appointees, is expected to become chairman, the Wall Street Journal reported, citing people with knowledge of the matter.
Mr. Redstone appointees will assume leadership positions on the company's audit and compensation committee, the people said.
The deal also includes a provision that any deal for Paramount must have unanimous backing of the board, terms that cement the Redstones' veto power.
Mr. Dauman will receive a severance package of $72 million, according to the people. Neither he nor Mr. Abrams will serve on the Redstone family trust. Keryn Redstone, Mr. Redstone's granddaughter, said Thursday she will review the settlement and decide whether to continue with her own lawsuit challenging his mental competence.
The deal ends a decades-long business relationship between the elder Mr. Redstone and Mr. Dauman, a corporate attorney who advised Mr. Redstone on many of his biggest deals, including the acquisitions of Viacom, Paramount and CBS. For years Mr. Redstone introduced Mr. Dauman on company conference calls as the wisest man he'd ever known.
The relationship soured this year, after Mr. Dauman replaced his mentor as chairman of Viacom and the board eliminated Sumner Redstone's remaining pay. Mr. Dauman's decision to sell a stake in Paramount angered Mr. Redstone, who fought a bruising battle to acquire the studio two decades ago. Mr. Redstone and his daughter then moved to unseat Mr. Dauman from the board and from their family's business affairs.
With Mr. Dauman gone, the focus of the board and management will shift to tough decisions facing Viacom. The first order of business will be deciding if the company should continue to seek a buyer for a minority stake in Paramount. Also on tap is whether to seek a permanent chief executive to replace Mr. Dooley or give the longtime Viacom executive a chance to prove himself in the new role.
The settlement also paves the way for the Redstones to pursue merger options for Viacom, including a potential recombination with CBS Corp., where the National Amusements also holds an 80% voting stake. A marriage of the two companies, which were split a decade ago, could add clout in negotiating deals with cable TV distributors.
CBS, the most-watched TV network, has successfully stood up to and won better terms from distributors such as Time Warner Cable in contract negotiations. Viacom, by contrast, has seen its channels dropped by some pay-TV operators.
The cable television giant, parent of Nickelodeon, Comedy Central and MTV, faces a myriad of challenges from declining ratings to its debt load, which exceeds $12 billion. Under Mr. Dauman, Viacom's networks contended with shrinking viewership and falling ad-sales as young audiences turn to their phone apps and web-streaming services such as Netflix and Amazon for entertainment. Paramount, meanwhile, fell to last place in box-office performance among the major movie studios.
"This is a good outcome for shareholders," said Paul Sweeney, an analyst with Bloomberg Intelligence. "The company needs to move past this silliness and focus on the business."
-- Bloomberg News