Sumner Redstone, the ailing 92-year-old media mogul who controls TV and movie powerhouses CBS and Viacom, has stepped down as executive chairman of CBS amid a courtroom battle over his health and mental capacity. CBS Chief Executive Leslie Moonves will replace him as chairman.
Redstone's resignation, which took effect Tuesday, is the near-final step to winding down his control of the giant entertainment companies he created out his father's drive-in movie business starting in the 1950s.
In a wrinkle to succession plans, Redstone's daughter Shari said in a statement she had gone against her father's stated intention that she succeed him and instead nominated Moonves as a "leader with an independent voice" who is not "otherwise intertwined in Redstone family matters."
That preference suggests Viacom Inc.'s current CEO might not succeed Redstone as chairman at that company, whose board is meeting Thursday.
Viacom CEO Philippe Dauman, once Redstone's trusted lawyer, holds authority to make medical decisions for Redstone if he is deemed incapacitated by his physician. Dauman is also a trustee in the trust that, upon Redstone's death, would control his near 80 per cent of voting shares in both CBS and Viacom, a fortune worth around $4 billion US. Shari Redstone, also a trustee, is vice chair of both companies.
Investors cheered the transition, sending CBS Corp. shares up 4.1 percent and Viacom shares up 10 per cent in after-hours trading.
The stock jumps came despite the fact that Redstone had all but disappeared from active management and last took part in quarterly conference calls for both companies in November 2014.
"There's probably no meaningful change in day-to-day operations," said Laura Martin, an analyst with Needham & Co. "He's had plenty of time to make sure the transition after him has been smooth."
SpringOwl Asset Management, a New York-based investment adviser, on Wednesday urged Viacom to similarly replace Redstone, but with "an independent director as executive chairman and that it not be Philippe Dauman."
The move leaves Redstone chairman emeritus of CBS, the company said Wednesday. It did not give an update on his health. For now, Redstone remains executive chairman of Viacom.
Redstone has been at the centre of a months-long court fight. His ex-girlfriend and longtime companion Manuela Herzer, who had been in control of Redstone's care, issued a court challenge over his decision-making capacity after she was expelled from his house in October.
Herzer contends that Redstone is unable to speak and cannot meaningfully engage in decision-making about his medical care or other subjects. She's challenged the validity of his increasingly illegible signature; Viacom regulatory filings last month omitted Redstone's signature for the first time since at least 2006, the first year the two companies operated separately.
Late last month, the judge in the case ordered Redstone to undergo a medical examination by Monday and instructed the doctor — hired by Herzer — to have the report prepared by Friday. A Redstone spokeswoman did not immediately respond to a request seeking comment.