CBS sues majority shareholder Shari Redstone to halt Viacom merger

Jeannie Matthews
May 15, 2018

As long as CBS Corp. keeps fighting itself, it won't stand a chance in a media world dominated by Netflix Inc., Walt Disney Co. and other powerful companies increasingly staking a claim on viewers and ad dollars. On Wednesday, the company will hold its 2018-2019 Upfront presentation in NY. The firm has "Hold" rating by Loop Capital given on Friday, November 17.

On Monday, CBS filed a lawsuit against National Amusements and its president, Shari Redstone, to block it from forcing the merger.

At that meeting, CBS is expected to propose a Class A common stock dividend that would dilute National Amusements' voting interest from approximately 79% to 17%.

National Amusements also controls around 80% of the voting shares of Viacom.

Legal experts said the lawsuit was a rare example of a company attempting to use a "nuclear option" to free itself from its controlling shareholder, setting the stage for a high-stakes legal battle over the future of one of the biggest US entertainment companies. "(CBS) Lawsuit Means All Out War, Rules Out Friendly Transaction with Viacom (VIAB) - CNBC" on May 14, 2018, also Streetinsider.com published article titled: "Viacom (VIAB) May option implied volatility increases after CBS (CBS) files suit against National Amusements", Streetinsider.com published: "Wall Street gains as trade worries subside" on May 14, 2018. The dividend would not dilute the economic interests of any CBS stockholder, ' states the release.

"The Special Committee has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders' interests and would unlock significant stockholder value", CBS said.

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The dividend "would enable the company to operate as an independent, non-controlled company, and more fully evaluate strategic alternatives", a CBS statement said.

CBS said in February it had established a committee to consider reuniting the two companies, combining CBS with Viacom's networks, which include Nickelodeon, MTV, BET and Comedy Central. Concurrently, Viacom's Class B shares slumped $1.48 to $28.74 - bringing the company's shares back to where they were in late November 2017.

National Amusements said it was "outraged" by the lawsuit and "strongly refutes [CBS'] characterization of recent events".

"Ensuring the long-term success of CBS continues to be NAI's sole interest".

CBS went on to accuse Redstone of interfering with the CBS board nomination process, of acting to undermine CBS' "highly lauded and successful management team in a series of escalating attacks", and blocking another unnamed acquisition partner from pursuing a deal with CBS.

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