Sumner Redstone’s declining health has set off a vicious battle for control of Viacom, the media and entertainment conglomerate he built.Alberto E. Rodriguez/Getty Images
The plot is nothing less than cinematic: an ailing patriarch, his once-estranged daughter and his trusted consigliere struggle to control the destiny of an empire worth billions of dollars, trading accusations of deception and betrayal.
Only this is no movie or miniseries. Instead, it is the real-life boardroom drama unfolding at Viacom Inc., the media and entertainment conglomerate built by Sumner Redstone.
Mr. Redstone, a legendary media mogul, turns 93 on Friday and he is no longer able to communicate normally. His declining health has set off a vicious battle between his daughter, Shari Redstone, and Philippe Dauman, the chief executive of Viacom and Mr. Redstone's adviser of more than three decades.
Hanging in the balance is the future of two media giants: Viacom – a $40-billion (U.S.) company that owns Paramount Pictures, Nickelodeon, Comedy Central and MTV – and CBS Corp., which is also controlled by Mr. Redstone.
Last week, Mr. Redstone removed Mr. Dauman and George Abrams, another long-time confidant, from the board of National Amusements Inc., the company that holds his controlling stakes in Viacom and CBS. He also ejected Mr. Dauman and Mr. Abrams from the trust that will control National Amusements in the event of his death or incapacitation.
On Monday, Mr. Dauman and Mr. Abrams retaliated with a lawsuit challenging the moves, saying they amount to "an unlawful corporate takeover." They accused Ms. Redstone of manipulating her aging father into doing her bidding. In court documents, they described how Mr. Redstone now requires round-the-clock care and is unable to walk, talk, read or write. Where once Mr. Redstone and his daughter had an acrimonious relationship, Ms. Redstone now "controls all facets of his life," they asserted, and claimed she has refused to allow members of Viacom's board to see him.
Lawyers for Mr. Redstone launched a countersuit arguing there is no evidence that Mr. Redstone is unable to manage his business affairs. Meanwhile, a spokeswoman for Ms. Redstone issued a statement saying it was "absurd for anyone to accuse Shari of manipulating her father."
The company's investors are watching the proceedings with dismay. "This is Sumner's fault and only Sumner's fault," said Salvatore Muoio, founder of New York-based investment firm S. Muoio & Co., which owns Viacom shares. Mr. Redstone has not been capable of running the company for several years, Mr. Muoio said. "The fact that he has not let go has created this three-ring circus."
Like other entertainment giants, Viacom is being buffeted by the shift away from cable television and the rise of new media, particularly since its audience tends to skew younger. Those forces, together with the succession drama, have pushed the company's share price down nearly 40 per cent over the past year. But Mr. Muoio believes Viacom's franchises remain highly valuable, especially to a would-be acquirer.
Meanwhile, the company's shareholders can merely watch as the struggle for control of the company plays out. Viacom has a dual-class share structure and 80 per cent of the Class A shares with voting rights are controlled by Mr. Redstone. The holders of Class B shares, who own the majority of the company, have "absolutely no say whatsoever," said Charles Elson, an expert on corporate governance at the University of Delaware. "They're kind of stuck."
It's unlikely the drama will conclude any time soon. Now the focus will turn once again to Mr. Redstone's capacity to make sound business decisions. Mr. Dauman, with his court challenge, will attempt to prove that Mr. Redstone no longer has that ability.
Recently, the same question surfaced in a different lawsuit. In that case, Manuela Herzer, Mr. Redstone's former girlfriend, claimed he was incompetent when he evicted her last year and removed her as his health-care agent, a role that was subsequently assumed by his daughter, Ms. Redstone.
In a videotaped deposition in early May, Mr. Redstone spoke with the help of an interpreter and was several times unable to respond to questions. He used profane language to describe Ms. Herzer and said he wanted her "out of his life." The judge dismissed Ms. Herzer's suit, but did not make any ruling on Mr. Redstone's mental capacity.