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Viacom Chief Nears Paramount Deal That Investors Doubt Will Get Past Redstone

Embattled Viacom Inc. Chief Executive Philippe Dauman is moving closer to clinching a deal to sell a 49% stake in movie studio Paramount Pictures, possibly for as much as $5 billion, to the Chinese entertainment and real estate conglomerate Dalian Wanda Group.

With his job in peril, Dauman has been working feverishly to pull off a transaction that he hopes would restore luster to Viacom’s stock and demonstrate that he has the mettle to continue to lead the media company that also boasts MTV, VH1, Nickelodeon, Comedy Central and BET.

But investors on Thursday let out a collective yawn, signaling Wall Street’s skepticism that Dauman will be able to complete the Paramount transaction in light of its ongoing, bitter boardroom battle.

Viacom shares were unmoved at $44.80 on Thursday, a day after the deal was first reported. Some investors also question whether it makes sense to sell nearly half the legendary but struggling film studio in light of the Redstone family’s longer-term goal of trying to recombine the two companies they control, Viacom and CBS Corp.

“It’s a desperate gamble, one designed to put the heat on Shari and Sumner Redstone,” Los Angeles investment banker Lloyd Greif said. “If you are in Philippe’s position, what do you have to lose? Right now he’s walking a tightrope.”

Dalian Wanda’s pursuit of a stake in Paramount underscores the company’s desire to become a global entertainment juggernaut. Hollywood studios have proved to be a difficult, capital-intensive business that’s nearly impossible for new entrants to replicate on their own.

A purchase would represent by far China’s most significant entry into the U.S. entertainment industry.

“It’s a scarce asset with high visibility in an industry that Wanda is already a big player in,” said Marc Ganis, co-founder and managing director of Jiaflix Enterprises, which helps studios distribute movies in China. “They’re not making any more of these.”