Out of her fa­ther’s shadow

CBS-Vi­a­com deal is a coup for once-dis­missed Shari Red­stone

Los Angeles Times - - FRONT PAGE - By Meg James

Just a few years ago, Shari Red­stone was on the outs of her fam­ily’s far-flung me­dia em­pire. Her fa­ther, Sum­ner Red­stone, once dis­missed her pub­licly as a light­weight who con­trib­uted lit­tle to the busi­ness. In­stead, he sur­rounded him­self with younger girl­friends and busi­ness cronies.

Ten­sions were so high that he of­fered her a $1-bil­lion buy­out, and she fumed to her son in 2015: “Your grand­fa­ther says I will be chair over his dead body.”

But on Tues­day the boards of CBS and Vi­a­com agreed to re­unite the two Red­stone-con­trolled com­pa­nies that were torn apart 13 years ago. And they an­nounced that Shari Red­stone would be­come chair­woman of the new en­tity, Vi­a­com-CBS Inc., join­ing a small num­ber of women over­see­ing a ma­jor U.S. com­pany.

Un­der the nearly $12-bil­lion deal, CBS will ab­sorb the smaller Vi­a­com, which owns such brands as MTV, Nick­elodeon, Com­edy Cen­tral and Para­mount Pic­tures.

The merger agree­ment is a tri­umph for Red­stone, who has over­seen the fam­ily’s con­trol­ling stakes in the two com­pa­nies since her fa­ther’s de­clin­ing health forced him to re­lin­quish con­trol. She pushed for the union, be­liev­ing the two com­pa­nies would be stronger to­gether dur­ing a tur­bu­lent time. The

en­ter­tain­ment in­dus­try is fac­ing in­tense pres­sure from tech­nol­ogy be­he­moths Walt Dis­ney Co., Net­flix Inc., Amazon.com Inc. and Google, which in­tro­duced pop­u­lar al­ter­na­tives to tra­di­tional tele­vi­sion. The chang­ing eco­nom­ics have created a sense of ur­gency among ma­jor Hol­ly­wood stu­dios to fortify them­selves by bulk­ing up.

“I am re­ally ex­cited to see these two great com­pa­nies come to­gether so that they can re­al­ize the in­cred­i­ble power of their com­bined as­sets,” Red­stone said in a state­ment Tues­day. “We will es­tab­lish a world-class, multi-plat­form me­dia or­ga­ni­za­tion that is well-po­si­tioned for growth in a rapidly trans­form­ing in­dus­try.”

In the last three years, she has proved her­self as a wor­thy suc­ces­sor to her 96year-old fa­ther, known for his stub­born streak and abil­ity to out­last op­po­nents. Since reen­ter­ing her fa­ther’s life in late 2015, Red­stone has van­quished more than a dozen men whom her fa­ther put in power. She halted a plan to sell the sto­ried Mel­rose Av­enue movie stu­dio, Para­mount Pic­tures, and now she has cor­rected what she long con­sid­ered a mis­take: her fa­ther’s sepa­ra­tion of CBS and Vi­a­com in 2006.

“Shari has def­i­nitely proven her­self as an ef­fec­tive strate­gist, some­one who is will­ing to go to what­ever lengths she needs to get some­thing done,” said Jor­dan Matthews, an en­ter­tain­ment at­tor­ney with Wein­berg Gonser in Los An­ge­les. “Peo­ple un­der­es­ti­mated her, but she’s proven that she’s ob­tained a lot of her fa­ther’s char­ac­ter­is­tics.”

The deal is sub­ject to reg­u­la­tory approvals, but the new com­pany is al­ready tak­ing shape. Red­stone’s hand­picked lieu­tenant, Bob Bak­ish, will over­see the new Vi­a­comCBS as chief ex­ec­u­tive. Their strong work­ing re­la­tion­ship en­sures that Red­stone no longer will be the sub­ject of board­room re­sis­tance. In­stead, she will be in­te­grally in­volved in steer­ing the ship as it tries to com­pete with much larger me­dia and tech­nol­ogy com­pa­nies.

Red­stone, as board chair, joins an elite group of women. Only 7% of the largest U.S. com­pa­nies in Stan­dard & Poor’s top in­dex have a woman as a board chair, ac­cord­ing to Fen­wick & West, a Moun­tain View, Calif., law firm. In an ad­di­tional 14% of those S&P 100 firms, a woman was lead di­rec­tor — an­other key board post.

“Less than a quar­ter of the S&P 100 com­pa­nies have a woman as their chair or a lead di­rec­tor, and that puts Shari in a no­table po­si­tion,” said Dawn Belt, a part­ner and coau­thor of Fen­wick & West’s Gen­der Di­ver­sity Study. “It’s awe­some. We need more women in lead­er­ship po­si­tions.”

The Red­stone fam­ily in­vest­ment firm, Na­tional Amuse­ments Inc., con­trols nearly 80% of CBS’ and Vi­a­com’s vot­ing shares. Over the years, Red­stone would tell her tough-as-nails fa­ther that she pos­sessed 80% of his brains, 90% of his pas­sion and 100% of his ob­ses­sive per­son­al­ity.

But her path to power, like most things in­volv­ing the Red­stone fam­ily, was con­tentious.

It wasn’t un­til the el­der Red­stone’s health de­te­ri­o­rated that she was able squeeze back into her fa­ther’s or­bit. Ear­lier this decade, two women had en­sconced them­selves in Sum­ner Red­stone’s life and he lav­ished them with gifts valued at $150 mil­lion. But by the sum­mer of 2015, those re­la­tions had frayed. The elderly mogul was reel­ing from one of the women’s be­trayal and prone to cry­ing spells. That girl­friend, Syd­ney Hol­land, left in Septem­ber 2015. A month later, Red­stone had his other for­mer com­pan­ion, Manuela Herzer, es­corted from his Bev­erly Park man­sion. Herzer sued, claim­ing Red­stone had lost his men­tal ca­pac­ity.

Herzer’s law­suit plunged Na­tional Amuse­ments and Vi­a­com into tur­moil. Shari Red­stone, who di­vides her time among Bos­ton, Con­necti­cut and Los An­ge­les, spent weeks as­sist­ing her fa­ther at his home and suc­cess­fully de­fend­ing the case against Herzer. (A judge even­tu­ally ruled in fa­vor of Red­stone.)

But it was for­mer Vi­a­com Chief Ex­ec­u­tive Philippe Dau­man’s plan to sell Para­mount Pic­tures that bonded fa­ther and daugh­ter.

Sum­ner Red­stone built his em­pire from a small re­gional chain of movie the­aters. Af­ter Vi­a­com pur­chased Para­mount Pic­tures in 1994, Red­stone hailed the mo­ment as his ar­rival in the me­dia big leagues. So when Dau­man pro­posed sell­ing Para­mount to a Chi­nese com­pany in early 2016, Shari Red­stone dug in for a fight.

Within a few months, she and Sum­ner Red­stone re­moved Dau­man and his ally from the fam­ily’s in­vest­ment firm, which pro­voked a high­stakes law­suit. The Red­stones pre­vailed, and Dau­man, who presided over Vi­a­com as its value plum­meted, re­signed.

“There was al­most will­ful de­struc­tion of MTV, VH1 and all of those iconic brands,” said Jef­frey Son­nen­feld, a pro­fes­sor at Yale School of Man­age­ment. “Even if you wanted to sab­o­tage the com­pany, it would be hard to do more dam­age than [pre­vi­ous man­age­ment] did.”

Shari Red­stone tried to nudge CBS to merge with Vi­a­com, but CBS’ then-leader, Les­lie Moonves, was wor­ried that Vi­a­com, which was grap­pling with a fall­ing stock price and an ex­o­dus of view­ers, would be­come a drag on CBS. In late 2016, Bak­ish was named Vi­a­com’s CEO and he be­gan work­ing to re­build the com­pany.

He in­vested in pro­gram­ming and made ac­qui­si­tions to broaden Vi­a­com’s reach. He over­hauled the man­age­ment of the mori­bund Para­mount and tossed out se­nior TV ex­ec­u­tives. In its most re­cent fis­cal quar­ter, Vi­a­com hit a mile­stone when it reported that do­mes­tic ad­ver­tis­ing had in­creased for the first time in five years. The com­pany also boasts this sum­mer’s top ca­ble se­ries, “Yel­low­stone.”

Shari Red­stone “could have taken her wealth and gone on her merry way, in­vest­ing in Face­book or else­where, with­out wor­ry­ing about the de­struc­tion of these iconic en­ter­prises,” Son­nen­feld said. “But she was here, try­ing to fix these me­dia plat­forms.”

In early 2018, Red­stone again tried to get CBS to en­ter­tain the Vi­a­com merger. Talks were on­go­ing but col­lapsed when CBS’ man­age­ment feared that she was try­ing to re­move Moonves’ al­lies on the board. CBS’ in­de­pen­dent board mem­bers filed suit to strip the Red­stones of their vot­ing con­trol.

But within a few months, the court fight in Delaware was eclipsed by a scan­dal en­gulf­ing Moonves, who had run CBS since the 2006 split. In­ves­tiga­tive re­porter Ro­nan Far­row re­vealed al­le­ga­tions of sev­eral women who ac­cused Moonves of sex­ual mis­con­duct in the 1980s and 1990s. (Moonves has de­nied the al­le­ga­tions.) Within six weeks, Moonves re­signed.

Be­hind the scenes, Red­stone was in­stru­men­tal in re­fresh­ing the CBS board by bounc­ing vet­er­ans who were friends of her fa­ther’s. But some on CBS’ board were wary. As a con­di­tion of the Septem­ber 2018 set­tle­ment, she agreed to not try to or­ches­trate a merger with Vi­a­com for at least two years.

Mean­while, the me­dia in­dus­try was rapidly con­sol­i­dat­ing. AT&T Inc. ac­quired Time Warner Inc., owner of HBO, CNN, TBS and Warner Bros. Dis­ney in March com­pleted its $71.3-bil­lion takeover of much of Ru­pert Mur­doch’s 21st Cen­tury Fox. This spring, in­de­pen­dent mem­bers of CBS’ and Vi­a­com’s boards be­gan dis­cussing a merger. Talks spanned months and cul­mi­nated Tues­day with the all-stock deal that the two com­pa­nies be­lieve will be com­pleted by the end of the year.

“Shari has been pretty adamant about this com­bi­na­tion,” said Daniel Lyons, a pro­fes­sor at Bos­ton Col­lege Law School. Tues­day’s agree­ment, he said, “vin­di­cates the strat­egy that she’s had.”

Now, the chal­lenge will be in­te­grat­ing two com­pa­nies that have been sep­a­rate for more than a decade. Bak­ish and CBS’ act­ing chief, Joseph Ian­niello, must fuse to­gether two dif­fer­ent cul­tures and nav­i­gate the shift to stream­ing ser­vices.

Me­dia ob­servers won­der whether Red­stone will po­si­tion Vi­a­comCBS Inc. for a sale — or if she will tighten her grip.

“It might de­pend on where the stock goes over the next year or two,” Matthews said. “But she’s fi­nally out from un­der her fa­ther’s shadow, and I think she’s driven to make a name for her­self and prove what else she can do.”

‘Peo­ple un­der­es­ti­mated [Shari Red­stone], but she’s proven that she [has] a lot of her fa­ther’s char­ac­ter­is­tics.’

— JOR­DAN MATTHEWS, Los An­ge­les en­ter­tain­ment at­tor­ney

Katy Winn Invision for L.A. Friendly House

SUM­NER RED­STONE once called daugh­ter Shari a light­weight, but she’s shown she’s a wor­thy suc­ces­sor.

JESSE GRANT Getty Images for Vi­a­com

SHARI RED­STONE, shown in 2017, has over­seen the fam­ily’s con­trol­ling stakes in CBS and Vi­a­com since Sum­ner Red­stone’s de­clin­ing health forced him to re­lin­quish con­trol. She’ll be chair­woman of Vi­a­comCBS Inc.

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