15 May 2018

CBS sues majority shareholder intent on forcing Viacom deal

The planned tie-up between media giants CBS Corp and Viacom is heating up as CBS sues Shari Redstone

Shari Redstone with father Sumner Redstone Shutterstock

CBS Corp and five directors are seeking an injunction in the Delaware Chancery Court to prevent majority shareholder Shari Redstone from interfering in its composition and governance before a board meeting Thursday. They are hoping to block Ms. Redstone’s voting power, arguing she is jeopardising the company by trying to force its merger with Viacom Inc. Last weekend, the CBS directors recommended rejecting the deal.

Undermining management
The lawsuit filed Monday accuses Ms. Redstone of breaching her fiduciary duty to CBS shareholders by pressing for a merger of the companies against the wishes of CBS board members. A temporary restraining order is requested to bar Ms. Redstone “from abusing (National Amusements) voting control and further harming CBS and its public stockholders in breach of their fiduciary duties,” according to the complaint.  CBS is seeking to have the preferred stock owned by Redstone and her National Amusements holding company diluted in order to keep her from replacing board members to complete the Viacom-CBS deal. The suit states, Ms. Redsone “has threatened to impose her and NAI’s will on the Company at the expense of all of the Company’s stockholders. She has undermined management. It has been publicly reported that she will replace directors who will not do her bidding,”

The two companies were split up more than a decade ago by Shari's father Sumner Redstone, and the Redstone family ultimately controls both companies because they own 80 percent of the voting shares. Ms. Redstone has called the CBS Lawsuit ‘Outrageous,’‘Precipitous,’ and ‘Bullying.’ A statement from National Amusements responded, “NAI had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies.” The statement added, “NAI’s conduct throughout supports this, and reflects its commitment to a well-governed process.” A hearing is set for tomorrow afternoon.