CBS Sues Controlling Shareholder National Amusements, Accuses Shari Redstone Of Undermining Board

CBS Corporation CBS filed a lawsuit Monday to prevent a merger with Viacom, Inc. VIAB and strip the proposal’s strongest advocate of significant voting power.

The lawsuit accuses Shari Redstone, president of majority shareholder National Amusements and vice chair of both CBS and Viacom, of neglecting her fiduciary duty by pressing the deal against the will of the board and precipitating a $7-billion drop in CBS’ market cap.

“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,” the complaint said. “These escalating attacks make it difficult for management to perform its duties and threatens continuity of management.”

CBS is pursuing a temporary restraining order against Redstone to prevent alleged abuse of voting control and interference with intended share dilution.

The CBS board is considering issuing a dividend from Class A stock to shareholders across Classes A and B to dilute National Amusements’ voting interest from 79 percent to about 17 percent.

“The dividend would not dilute the economic interests of any CBS stockholder,” CBS said in a press 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.”

The move would effectively prevent National Amusements from replacing board members to advance the Viacom deal and would instead allow CBS to operate as an independent, non-controlled company free to weigh strategic alternatives.

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