Best reason to keep Viacom’s interim boss: breakup

August 24, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Viacom has one good reason to keep interim Chief Executive Thomas Dooley: a breakup of the media company. The former chief operating officer with close ties to ousted boss Philippe Dauman makes an odd choice if the $17 billion firm plans to do anything else. A veteran who has been at Viacom on and off since 1980, though, Dooley may be well suited to finding the best value for Viacom’s various assets.

Dooley emerged from Viacom’s most recent boardroom drama as Dauman’s replacement through Sept. 30, when Viacom’s fiscal year ends. Beyond that, he needs to convince five new board members of his usefulness atop a group that controls cable networks Nickelodeon and MTV and a Hollywood studio.

That comes down to what sort of strategy the new board, in conjunction with the Redstone family, which controls Viacom through National Amusements, wants to pursue. They could try to turn around their lackluster properties, like Comedy Central, on their own but that would be a Sisyphean task. Ratings for its networks are in the dumps. At MTV from the end of June through August, for example, viewership among 12- to 34-year-olds has declined mostly in double digits year-over-year, according to Nielsen. Paramount’s operating loss for the nine months ending in June tallied $316 million.

A sale of the company in whole or in parts is perhaps a better outcome. As it is, Dauman is hanging around until Sept. 13 so he can pitch a plan to sell a minority stake in Paramount Pictures. He indicated that stake could unlock some $4 billion for shareholders. Meanwhile, Wedbush Securities reckons Viacom’s cable networks are worth around $26 billion, or about seven times 2017 EBITDA.

Rightly or wrongly, Dooley’s tenure is yoked to Dauman’s performance. Though Dooley joined Viacom in 1980, he left 20 years later to form a private-equity venture with Dauman. The two came back in 2006 to run the show with Chairman Sumner Redstone’s blessing. Since breaking off from Viacom a decade ago, CBS shares have doubled and Viacom’s have appreciated by barely 1 percent.

Dooley is a known quantity with Viacom’s outside shareholders and on Wall Street, and has experience buying and selling businesses including Blockbuster, CBS, and Paramount. He also has the respect of Viacom’s new directors, including Buzzfeed Chairman Kenneth Lerer. Endorsements like that merit consideration to remain in charge. But for the sake of investors not named Redstone, he’d have to prove he can overcome years of status quo.

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