Viacom's New Activist Faces Uphill Battle
20 January 2016 - 10:43AM
Dow Jones News
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)
Copyright (c) 2016 Dow Jones & Company, Inc.
Time Warner (NYSE:TWX)
Historical Stock Chart
From Apr 2024 to May 2024
Time Warner (NYSE:TWX)
Historical Stock Chart
From May 2023 to May 2024