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cc Thursday, July 14, 2016 latimes.com/news

Viacom chief nears Paramount deal that investors doubt will get past Redstone

By MEG JAMES AND RYAN FAUGHNDER TIMES STAFF WRITER mbattled Inc. Chief Executive Philippe E Dauman is moving closer to clinching a deal to sell a 49% stake in movie studio , possibly for as much as $5 billion, to the Chinese enter- tainment and real estate conglom- erate Dalian Wanda Group. With his job in per- il, Dauman has been working fe- verishly to pull off a transaction that he hopes would restore luster to Viacom’s and demon- strate that he has the mettle to con- A deal is in the works to sell a 49% stake in Paramount Pictures to Chinese tinue to lead the media company firm Dalian Wanda Group. (Anne Cusack / Times) that also boasts MTV, VH1, , Comedy Cen- film studio in light of the Redstone the company’s desire to become a tral and BET. family’s longer-term goal of trying global entertainment juggernaut. But investors on Thursday let to recombine the two companies Hollywood studios have proved to out a collective yawn, signal- they control, Viacom and CBS be a difficult, capital-intensive ing Wall Street’s skepticism that Corp. business that’s nearly impossible Dauman will be able to complete “It’s a desperate gamble, one for entrants to replicate on the Paramount transaction in light designed to put the heat on Shari their own. of its ongoing, bitter boardroom and Sumner Redstone,” Los Ange- A purchase would represent by battle. les investment banker Lloyd Greif far China’s most significant entry Viacom shares were unmoved said. “If you are in Philippe’s posi- into the U.S. entertainment indus- at $44.80 on Thursday, a day after tion, what do you have to lose? try. the deal was first reported. Some Right now he’s walking a tight- “It’s a scarce asset with high investors also question whether it rope.” visibility in an industry that Wanda makes sense to sell nearly half the Dalian Wanda’s pursuit of a is already a big player in,” said legendary but struggling stake in Paramount underscores Marc Ganis, co-founder and man- aging director of Jiaflix Enterpris- have, being the largest theater lerno, also sued in Delaware to es, which helps studios distribute owner in the world,” Ganis said. block that move -- putting on movies in China. “They’re not “They can leverage this kind of hold any board changes or major making any more of these.” acquisition better than any other business initiatives. For those reasons, Wanda may Chinese company by a wide mar- Dauman and his team appear be willing to pay a hefty price for a gin.” eager for a sale to boost Viacom’s piece of Paramount, Ganis said. But Dauman will have to per- share price in advance of the com- Wall Street analysts have estimat- suade Viacom board members -- pany’s earnings report next ed the overall value of the studio at and a judge in Delaware -- that he month. Some Wall Street analysts $8 billion to $10 billion. has the legal authority to sell a have trimmed estimates for Via- In recent years, Chinese compa- piece of Paramount. com after the Paramount movie nies have been investing heavily in Ailing Sumner Redstone, the con- “Teenage Mutant Ninja Turtles: Hollywood. Alibaba Group, Ten- trolling shareholder, opposes the Out of the Shadows” turned in a cent and Huayi Bros. have made Paramount deal. Earlier in his ca- disappointing box-office perfor- incursions in Hollywood by invest- reer, Redstone operated a small mance. and MTV ing in production companies, mov- movie theater chain and buying continue to struggle to improve ies and film slates. Beijing-based Paramount in 1994, after a hard- their low ratings. entertainment firm Perfect World fought battle, elevated his status to Wanda invested in the in February agreed to invest in 50 a major media mogul. “Teenage Mutant Ninja Turtles” movies from The Redstone family invest- film and previously worked with over five years. ment vehicle, National Amuse- Paramount to promote movies in Wanda, run by Chinese billion- ments Inc., last month changed China. aire Wang Jianlin, owns the largest Viacom’s bylaws to require a Viacom’s plan to sell a piece theater chain in China and has unanimous vote of Paramount generated much in- been swiftly bulking up its hold- by Viacom’s board for any sale of terest, but several parties balked at ings in the U.S. entertainment in- an interest in Paramount. Presuma- the idea of owning a minority dustry. The company bought Bur- bly Sumner Redstone and his stake. Analysts said Thursday that bank production firm Legendary daughter, , who Wanda probably is negotiating a Entertainment for $3.5 billion this both are board members, would path to full control of the studio. year. It also owns AMC Entertain- block the deal. Another sticking point may be ment, the second-largest U.S. thea- The Redstone family controls whether , Paramount’s ter chain. nearly 80% of the voting shares of chairman for the last decade, Meanwhile, U.S. studios are Viacom and CBS Corp. would remain in charge. trying to do a better job of tapping “Unless Viacom’s board pre- Late Thursday, a Viacom exec- in the Chinese box office, set to sents a concrete plan that convinc- utive close to the situation denied surpass the U.S. and Canada as the es him otherwise, Mr. Redstone that Grey’s chairmanship was a world’s biggest film market by the continues to believe that it is in the factor in discussions with any po- end of this decade. best interest of Viacom that Para- tential bidders. Movies that fail at home can mount Pictures should remain find a new life abroad. Legend- wholly owned by the parent com- ary’s big-budget video game adap- pany,” a spokesperson for Red- tation “Warcraft” was a bomb in stone said in late May. the U.S. and Canada. But the ef- Viacom last week asked a judge fects-heavy adventure grossed in Delaware to expedite his review $220 million in China ticket sales, of ’ action to or roughly half its global tally. remove five Viacom board mem- “Wanda is in a unique position bers, including Dauman. Viacom’s to leverage the assets they already independent director, Frederic Sa-