Taking the fight over a CBS-Viacom remerger to a new level, CBS on Monday filed a lawsuit against its controlling stakeholder Shari Redstone and National Amusements.
The suit, filed in the Delaware Court of Chancery, alleges Redstone, who controls 79 percent voting interest through her National Amusements holding company, breached fiduciary duty to CBS shareholders by pushing Viacom merger despite rejections from CBS board members.
CBS has requested a temporary restraining order to prevent Redstone from interfering with a special meeting of the company’s board directors on Thursday, at which CBS plans to propose a Class A common stock dividend that would dilute Redstone’s National Amusements’ voting interest from approximately 79 to 17 percent.
“The Special Committee believes that the Company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone’s potential response to the Special Committee’s unanimous decision yesterday, May 13, 2018, that the proposed Viacom transaction is not in the best interests of CBS stockholders (other than NAI),” CBS wrote in its filing.
The suit alleges Redstone has attempted to undermine CBS management, led by CEO Leslie Moonves.
“Ms. Redstone has acted to undermine the management team, including, without board authority, talking to potential CEO replacements, deriding the Chief Operating Officer and threatening to change the Board. These escalating attacks make it difficult for management to perform its duties and threatens
continuity of management,” CBS wrote in the suit.
Redstone reportedly wanted Viacom’s CEO Bob Bakish to take the reigns as COO of a combined Viacom-CBS, while Moonves was pushing for current COO, Joe Ianniello.
CBS also blames Redstone for the company’s recent loss in market cap.
“Even if Ms. Redstone does not attempt to force a merger with Viacom, the harm to CBS and it stockholders is clear: despite management’s record performance in the face of Ms. Redstone’s conduct, CBS’s stock has fallen from nearly $70 to around $50 in the last several months—an approximately $7 billion loss in market cap born by Class B stockholders,” the suit states.
Viacom and CBS first split in 2006, and the recent lawsuit comes after months of talks between the two about a potential remerger. Redstone had pressed for a deal in 2016, but CBS contends in its lawsuit that those negotiations came to a halt as soon as CBS insisted the combined company would operate outside of Redstone’s control for at least five years.