Viacom Hints at Challenge to Change of Bylaws Pertaining to Paramount Sale

In a securities filing, Viacom states the move to block a Paramount sale could have a "significant adverse effect on the Company’s share price."
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On Friday, Viacom toed the line by filing new amendments to its bylaws that require unanimous approval of the company's board to approve any sale of Paramount Pictures. However, the 8-K filing with the Securities and Exchange Commission characterizes the amendments as "purported," discusses the background drama between chairman Philippe Dauman and Sumner Redstone and clearly hints of a challenge to come with word that the changes "may be determined to be invalid."

By securities law, Viacom had four days to file amendments after National Amusements Trust, which controls 80 percent of the company's voting stock, issued the amended corporate bylaws "to protect the long-term interests of all Viacom shareholders."

The move from National Amusements, controlled by Redstone, came on Monday, meaning Viacom waited until nearly the deadline before filing with the SEC.

The latest filing says that as a "precautionary matter," Viacom will be also be lodging an information sheet "in order to provide stockholders with required information regarding the Purported Bylaw Amendments."

Viacom is acknowledging that the Redstones — including Shari Redstone — have expressed a lack of interest in selling Paramount, but the company currently run by Dauman believes that a sale is in the company's best interest. In a speech on Thursday, Dauman stated he would move forward and outlined the parameters of what would be the selling of a 49 percent stake in the movie studio to a "strategic partner."

In the 8-K filing today, which comes upon reports of an imminent shakeup to Viacom's board, the company makes the case that the bylaw changes  — which also notably and with much less fanfare establish Delaware's Court of Chancery as the exclusive forum of disputes related to the enforcement of bylaws and the fiduciary duties of officers and stockholders — won't do the company any good. It states:

"The Purported Bylaw Amendments, along with the statements and conduct referred to above, would therefore have an adverse effect on the ability of the Company to assess fully the extent to which potential investors would be interested in making a value-enhancing investment in Paramount and, by harming the process and providing each of Mr. Redstone and Ms. Redstone with a veto over any such transaction, would, in light of the foregoing and unless they change their positions, have the effect of preventing it entirely, even if such a transaction would otherwise create value for other stockholders of the Company. The constraint imposed by the Purported Bylaw Amendments could therefore have a significant adverse effect on the Company’s share price."