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Viacom warns bylaw change may hurt stock: SEC filing

Reuters
Sumner Redstone, executive chairman of Viacom Inc and CBS Corp, poses for a photo after answering questions at the Milken Institute Global Conference in Beverly Hills, California, U.S. May 2, 2012. REUTERS/Danny Moloshok

NEW YORK (Reuters) - Viacom Inc (VIAB.O) warned on Friday that its shares could fall as a result of a bylaw change by controlling shareholder Sumner Redstone to restrict Viacom's planned sale of a stake in its Paramount film unit.

The bylaw change could have a "significant adverse effect" on the media company's share price, according to a regulatory filing on Friday.

On Monday, Redstone's National Amusements Inc, which holds 80 percent of Viacom voting shares, amended the bylaws of Viacom to require unanimous approval from Viacom's board for any deal related to Paramount Pictures.

That change has cast uncertainty over Viacom CEO Philippe Dauman's plan to sell a 49-percent stake in the movie studio that Redstone was quoted as calling his "baby" in recent court filings.

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Dauman said on Thursday that the sale process is ongoing, but it has been slowed by Monday's bylaw change.

Viacom's response comes in the middle of a heated battle for control of 93-year Redstone's $40 billion media empire. Redstone has ousted Dauman and George Abrams from the board of National Amusements and from the trust that will control Redstone's voting shares after he dies or is declared mentally incompetent.

Dauman and Abrams have filed a lawsuit in Massachusetts, arguing that their removal from the trust amounted to an "unlawful corporate takeover" engineered by Redstone's daughter, Shari. That same lawsuit challenges Redstone's competency.

In Friday's filing with the U.S. Securities and Exchange Commission, Viacom argues that if the removal of Dauman and Abrams are found to be "the product of Mr. Redstone's incapacity and/or undue influence," then the bylaw change may be void.

A Massachusetts judge is currently considering Dauman's motion to speed up discovery and expedite the trial related to his lawsuit.

Lawyers for Shari Redstone oppose that motion, arguing in court filings that Dauman and Abrams were motivated by self interest. They said they plan to file a motion to dismiss the case on June 16.

Shares of Viacom fell nearly 2.6 percent, or $1.17 to $43.24, in mid-day trading on the New York Stock Exchange.

(Reporting by Anna Driver; Editing by Nick Zieminski)