After the numerous announcements, suits, countersuits and press releases that have been issued since last Friday between Sumner Redstone and Philippe Dauman, there needs to be a number of changes made immediately at Viacom (VIAB):
-- In light of Philippe Dauman's suit brought against Redstone earlier this week, Dauman is no longer fulfilling his fiduciary responsibilities to Viacom shareholders (as Redstone controls 79.5% of the voting shares through National Amusements). If Dauman is serving his own needs instead of those of the Viacom shareholders, he should no longer serve as Viacom's CEO. We would like to see Dauman removed immediately as chairman and CEO of Viacom and the board replaced.
-- Knowing that Redstone would like Viacom's next CEO to be someone he trusts, and in light of the track record of the last 10 years, we think the ideal next CEO of Viacom should be Leslie Moonves of CBS (CBS). Moonves is quite simply the best in the business at his job. It's in the best interests of both Viacom and CBS shareholders to see a re-merging of those two companies under the leadership of Moonves. Obviously, this should be done at a price that is fair to all parties involved.
-- The combination of Viacom and CBS assets -- broadcast, premium, cable networks, international cable networks and TV production -- under the capable leadership of Moonves would make it comparable in size and scale to 21st Century Fox (FOXA) and Time Warner (TWX). It would be better able to compete in the media space, realize cost synergies to improve profitability, and more capable of pursuing strategic acquisitions down the road.
-- Even though the debt to EBITDA ratio of a combined Viacom and CBS would be below 3x, we recommend the board consider spinning off Paramount to raise money and reduce debt. This would help maximize the value of this important asset under the leadership of Brad Grey.
-- Earlier this week, Dauman instructed Viacom employees to ignore his suit and Redstone's countersuit and to instead focus on doing their jobs. We don't think this is realistic. Dauman is serving his own interests and not Viacom's shareholders. National Amusements should immediately remove Dauman from his chair and CEO roles at Viacom. National Amusements should also replace the Viacom board and immediately start exploring merger discussions with CBS.
Enough is enough. It's time to turn the page on the Dauman era at Viacom.