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Sumner Redstone

Sumner Redstone Hangs By His Fingertips Again

October 20, 2008 07:00 PM
by Anne Szustek
Sumner Redstone often boasts of how he once survived a hotel fire by hanging from a windowsill by his fingertips—now he’s grasping to hold on to his CBS and Viacom shares.

Sale of Redstone’s Stakes in Viacom or CBS a Possibility

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In 1979, Sumner Redstone was trapped in a fire at Boston’s Copley Plaza Hotel. Despite finding refuge on a window ledge—a bit of the story he apparently loves to share in conversations as testament to his tenacity—he sustained burns severe enough to warrant 30 hours of surgery. The New York Times’ Geraldine Fabrikant wrote in 1987, “And though he was warned that he might never be able to live a normal life, eight years later he is fit enough to insist on playing tennis nearly every day.”

Redstone survived that struggle for life, but he has certainly had his share of life’s struggles.

There have been rumors of a growing feud between Sumner and his daughter Shari Redstone, generally considered the likely successor to the Redstone empire, which encompasses movie theater chain National Amusements and holdings in major media companies including Viacom and CBS. The elder Redstone was also entangled in a lawsuit with his son (and Shari’s brother) Brent.

Redstone also had a falling out with Tom Cruise in 2006, firing him from Viacom subsidiary Paramount in light of the fallout from the actor’s appearance on “The Oprah Winfrey Show,” during which Cruise jumped on the couch in proclamation of his love for now-wife Katie Holmes. The same year, Sumner Redstone sacked Viacom CEO Tom Freston, replacing him with Philippe Dauman over disagreements in new media ventures.

The current volatile financial markets are the latest bugbear for Redstone. According to Reuters and the New York Post, Sumner Redstone may be pressured to sell his stake in Viacom Inc. and CBS Corporation to shore up cash reserves to settle $1.6 billion in margin calls on debt arranged by various banks including Bank of America. Margin calls are made by creditors to collect funds when the price on stocks used as margin on loans falls below a predetermined minimum.

“Sumner needs more money,” one source told the New York Post.

Last Monday Redstone announced that he had sold some $233 million in stock to raise cash to put toward the debt, incurred for expansion projects for National Amusements. Another Post source said that Redstone’s Viacom stock is more valuable; but he has a deeper sentimental attachment to it. In addition, if Redstone sells off only units of CBS—rather than all of his holdings in the company—that might not generate enough cash to fill the gap, as those earnings would go to CBS rather than be applied to National Amusements.

The Post writes, however, that “someone familiar with Viacom” told the paper that Redstone “could still head off a sale by renegotiating the terms of the bank loan.”

Background: The trials and tribulations of Sumner Redstone

Despite legal documents relating to Sumner’s trust being private, it’s “general knowledge,” as BloggingStocks puts it, that Sumner Redstone has named his daughter Shari to take up the role of chairwoman upon Mr. Redstone’s death. The younger Redstone already serves as president of National Amusements, as well as vice chairwoman of CBS and Viacom. In Dec. 2007, she became the chair of video game publisher Midway Games, which has such games as Mortal Kombat and Ms. Pac Man in its library.

But Sumner Redstone has been trying to force his daughter off the boards of CBS and Viacom for over a year, pointing out that he holds the right to buy out her 20 percent stakes in both CBS and Viacom. Putting salt on the wounds was an open letter to Forbes in which Sumner wrote that his daughter had made “little to no contribution” to the Redstone family’s media holdings. Shari was so enraged that she considered legal action against her father. The father-daughter team has since been seen together in public, acting cordially, yet tensions remain. During last week’s massive stock sell to satisfy the margin call, National Amusements was quick to reiterate that the plunging stock market was the reason for the sell-off, rather than a family dispute.

Adding to family pressure was Brent Redstone’s Feb. 2006 lawsuit against National Amusements, claiming that his father and sister were involved in “self dealing.”

Sumner Redstone’s spats aren’t all in the family however. He let Tom Cruise go in Aug. 2006, after his “Oprah” couch-jumping stunt, followed by a “Today Show” appearance during which he ranted against prescription drugs instead of plugging “Mission Impossible III.” Redstone was quoted as saying in The Huffington Post, “He was embarrassing the studio. And he was costing us a lot of money … He turned off all women, and a lot of men.” Rumors began to circulate in March that the mogul and the actor were mending relations when they were seen having dinner together in Los Angeles.

The travails between Redstone and Tom Freston stemmed from the former’s perceptions that the Viacom CEO was not doing enough in the online media segment to keep from losing young MTV viewers to sites like YouTube and MySpace.com. Freston had been working at Viacom for 26 years; however following its split from CBS, Redstone gave him one year to prove Viacom’s viability as its own entity.

The firing came shortly after the 2006 MTV Video Music Awards, which had dismal ratings. Redstone hired Philippe Dauman as Freston’s replacement. Financial journalist Jim Cramer wrote for New York Magazine in Sept. 2006, “Now it looks like Redstone’s back running the company. Don’t believe for a minute that Philippe Dauman will be in charge.”
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