CBS Sues To Ice Viacom Reunification

Sergio Cunningham
May 15, 2018

Now, CBS is suing to block any interference by National Amusements ahead of a CBS board vote on a dividend that would dilute National Amusements' voting interest from 79 per cent to 17 per cent. CBS says that would make CBS independent and allow it to "more fully evaluate strategic alternatives".

The Redstone family booted Viacom CEO Philippe Dauman off the board along with four other directors so the controlling shareholder could change Viacom's management, which the Redstones blamed for the company's declining stock price at the time. At the meeting, the committee is set to consider issuing a special dividend to all shareholders that would neutralize Ms. Redstone's special voting powers. "CBS's stock price has dropped from almost $70 per share to almost $50 per share since merger talks were reinstated-a loss of approximately $7 billion in market cap suffered by the Class B stockholders".

The lawsuit was pre-emptive, CBS said, because Ms. Redstone had considered replacing CBS's board if it continued to resist a merger with Viacom.

Multiple sources say Verizon had been involved in high-level discussions with CBS a year ago.

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Moonves wants CBS COO Joseph Ianniello to be president and COO of the merged entity, and to succeed him as CEO when he retires.

The process of diluting the control of National Amusements and thus both Redstones was also addressed in a release sent out by CBS on Monday. "This is not too dissimilar to the course of action at Viacom sometime back when the board sued the Redstones, but the circumstances were different due to the ground of litigation as well as credibility of the management team at Viacom", Venkateshwar wrote in a research note.

The news of the lawsuit, filed to a DE court and also seeking to dilute the 79 percent voting rights in CBS held by Redstone's National Amusements Inc., pushed the network's shares (CBS) up almost 1 percent and those in Viacom (VIA) down 6 percent. "Ensuring the long-term success of CBS continues to be NAI's sole interest".

In its response a few hours later, Redstone's camp expressed skepticism that the CBS board members are really acting independently, using the word in quote marks: "This precipitous lawsuit, and the efforts of CBS management and its "independent" directors to wrest voting control from NAI, are outrageous", NAI said. "We intend to defend our position vigorously and look forward to presenting our arguments in court".

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