Viacom Interim CEO Tom Dooley to Depart, Company to Consider "All Options"

The Hollywood Reporter

Viacom said Wednesday that interim CEO Tom Dooley will depart in November and that it has decided to cut its quarterly dividend by 50 percent from 40 cents per share to 20 cents.

After what sources said was a Tuesday afternoon board meeting, the company also confirmed that it has stopped looking at the possible sale of a minority stake in its Paramount Pictures, but would consider "all options." Plus, Viacom lowered its financial guidance for the current quarter, in part due to a charge in its film unit.

The news was the latest major company development following the recent ouster of Philippe Dauman, whose official last day as non-executive chairman was last Tuesday, and the appointment of Tom Dooley as interim CEO.

But Dooley has decided to step down, the company said Wednesday. It also confirmed that it won't pursue Dauman's plan to sell a minority stake in Paramount Pictures.

Read more: Tom Dooley's Viacom Farewell: "Right Time for New Leadership"

Controlling shareholder Sumner Redstone and daughter Shari Redstone have been looking to work with the rest of the board to improve the company's performance. Viacom has faced ratings and advertising challenges at its cable networks, while its Paramount Pictures has had several disappointments.

Viacom's board, including five recently appointed new members, held a regularly scheduled meeting in New York last Wednesday and Thursday that was focused on budget and strategy issues ahead of the Sept. 30 end of the company's fiscal year. No news was announced right after those meetings, which saw new board members take a very active role, according to one source. 

Dooley will remain in his interim position through Nov. 15 "to facilitate an orderly transition." No immediate successor as president and CEO was named, but the company will start an executive search.

Dooley will have the opportunity to earn a "retention payment" of $4.375 million by not resigning before Nov. 15, according to a regulatory filing. "In addition, the retention payment shall be deemed earned if Viacom terminates your employment before November 15, 2016, in which case the amount thereof will be increased to reflect the additional salary you would have earned had you in fact remained employed through November 15, 2016," the filing said.

Viacom said it would "shortly access debt markets in order to improve liquidity and financial flexibility." It added: "The company has ended the process of seeking a minority investor in Paramount Pictures at this time in order to consider all options available to the company."

Viacom detailed Wednesday that it expects that adjusted diluted earnings per share for the fiscal fourth quarter will be in the range of 65 cents-70 cents, below previous estimates. The revision accounts for a programming impairment charge of $115 million in its filmed entertainment segment in the fiscal fourth quarter related to the expected performance of an unreleased film, as well as severance expenses.

"The board believes Viacom has a product strategy that is among the best in the industry. The steps we are taking will make the company financially stronger and more flexible and will position Viacom to take advantage of future growth opportunities," said chairman Tom May. "I am pleased that Tom Dooley has agreed to stay on as interim president and CEO through November 15 to allow the board to conduct an orderly succession process.''

Read more: Viacom Dividend in Focus Ahead of Board Meeting

Shari Redstone, vice chair, said: "I have been energized by the passion, commitment and ideas put forward by our newly expanded board and members of Viacom's senior team. While there is more work to do, the actions announced today are an important first step towards realizing the value of Viacom's exceptional assets and positioning the company for the future."

Said Dooley: "While this was a difficult decision for me, I have great admiration for our new board and I feel that they will be best able to execute on their vision for the company in the hands of a new president and CEO. I am certain that the board will make the most of the company's extraordinary potential. I want to thank Sumner, Shari and the members of the Board for the opportunities they have provided me. I look forward to working with them to deliver Viacom into the hands of new leadership in excellent shape and poised for a remarkable future."

Wall Street had seen a dividend reduction as a likely outcome as Viacom has been reviewing its capital structure. Its debt stood at $12.37 billion as of June 30, with $1.4 billion of that maturing over the next year. Credit analysts at Moody's and S&P have said in recent months warned that they could downgrade their debt ratings on the company, which would increase Viacom's borrowing costs.

In May 2015, the company raised its dividend by 7 cents, or more than 20 percent, to 40 cents per share. Moody's Investors Service analyst Neil Begley has said the annual dividend payments amount to approximately $636 million.

But he has said a dividend cut alone would not save the company's credit ratings longer-term. "Absent concurrent enhancement of audience ratings performance and advertising sales, a dividend reduction alone would not be sufficient to hold the current rating," Begley wrote in a recent report. "But it would certainly help preserve liquidity and reduce debt more rapidly as the company continues to align its operations to withstand risks from changes in the traditional media ecosystem."

In the same report, he wrote: "If Viacom cuts its dividends by 75 percent to roughly $160 million per year, it would have over $1 billion of cumulative excess cash through the end of fiscal [year] 2018." But Bloomberg data suggested that most on Wall Street were expecting a dividend reduction of 50 percent.

CBS Corp., also controlled by Redstone, had in July announced a 20 percent quarterly dividend increase to 18 cents per share. CBS CEO Leslie Moonves said last Thursday that the company was "not in active discussions" about a recombination with Viacom, which some on Wall Street have continued to discuss.

Read more: Leslie Moonves: CBS "Not in Active Discussions" to Merge With Viacom