CBS Goes on Attack Against Redstones, Sues Controlling Shareholder

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CBS Corp. has declared battle on its controlling shareholder, suing

Shari Redstone

and her household’s

Nationwide Amusements Inc.

holding firm for making an attempt to pressure CBS to merge with


VIAB -6.78%

The lawsuit is a transfer by the media firm and its impartial administrators to reject the prompt merger, stop Ms. Redstone from retaliating in opposition to the board for refusing the deal, and cut back Nationwide Amusements’ voting energy.

Filed Monday within the Chancery Court docket in Delaware, the swimsuit seeks to dam Nationwide Amusements and its president, Ms. Redstone, from forcing a recombination of CBS and Viacom, that are each managed by the Redstones. Ms. Redstone has been advocating such a mix over the previous two years.

CBS and the 5 impartial administrators on its particular committee say they filed the swimsuit to forestall Nationwide Amusements, media mogul

Sumner Redstone

and his daughter Shari “from breaching their fiduciary duties and harming the Firm and its public stockholders.”

The particular committee, which was fashioned to guage a possible merger, mentioned it has determined the proposed Viacom deal isn’t in the most effective curiosity of CBS shareholders and says Ms. Redstone poses “a critical menace of imminent, irreparable hurt” to public stockholders.

In response, Nationwide Amusements mentioned it will vigorously defend itself in courtroom.

“Nationwide Amusements (NAI) is outraged by the motion taken by CBS and strongly refutes its characterization of latest occasions,” the holding firm mentioned in an announcement. “NAI had completely no intention of changing the CBS board or forcing a deal that was not supported by each corporations.”

Viacom declined to remark.

Nationwide Amusements controls CBS by a dual-class inventory construction that offers Nationwide Amusements 80% voting energy regardless of solely proudly owning about 10% of the corporate’s Class A and Class B shares. CBS mentioned it has scheduled a board assembly this Thursday to think about issuing a dividend of voting Class A shares to all stockholders that would cut back Nationwide Amusements’ voting energy to solely 17%.

“The contemplated dividend would dilute NAI’s voting management in order that Ms. Redstone is now not capable of block the CBS Board from contemplating acceptable company methods in the most effective curiosity of all stockholders,” the swimsuit mentioned. Decreasing the voting energy would additionally stop Ms. Redstone from changing CBS’s impartial board members.

CBS says the issuance of the inventory dividend, which wouldn’t cut back any shareholders’ financial possession, is “expressly permitted” by the corporate’s constitution. If the dividend goes by, all CBS shareholders would then have the ability to elect the board of their alternative, the lawsuit states.

CBS is looking for a short lived restraining order to dam Ms. Redstone from making any modifications to the board earlier than Thursday’s assembly. The corporate’s annual assembly is Friday the place some board members can be elected.

The lawsuit took Ms. Redstone abruptly, in accordance with an individual acquainted with her pondering.

“This precipitous lawsuit, and the efforts of CBS administration and its ‘impartial’ administrators to wrest voting management from NAI, are outrageous,” Nationwide Amusements mentioned within the assertion.

The holding firm mentioned it “believes CBS’s motion immediately was precipitated following NAI elevating particular issues about incidents of bullying and intimidation in relation to 1 CBS director, relationship again to 2016.” Nationwide Amusements didn’t establish the director, however an individual acquainted with the matter mentioned the director in query sits on the CBS board’s particular committee.

Ms. Redstone has mentioned her issues about this board member with CBS over the course of many months, and there was a provisional settlement that the board member would both not be a part of the merged firm or, within the occasion of no deal, be faraway from the CBS board, in accordance with an individual acquainted with the matter. Because the merger talks dragged on and CBS’s annual assembly loomed, Ms. Redstone introduced up her issues about this board member once more on the finish of final week, the particular person mentioned.

CBS declined to touch upon Nationwide Amusements’ accusation.

Monday’s lawsuit is way from the primary time that a energy battle over the Redstone household’s media empire has performed out in courtroom. Ms. Redstone rose to prominence two years in the past within the wake of an influence battle at Viacom that led to the ouster of Viacom CEO

Philippe Dauman

and the substitute of some board members.

The authorized proceedings round that battle additionally raised questions on Mr. Redstone’s psychological capability. Quickly after gaining energy, Ms. Redstone pushed for the exploration of a merger between CBS and Viacom, which her father had break up aside in 2006. After CBS proved reluctant except it was granted numerous measures of management, Nationwide Amusements quickly dropped the trouble. It rekindled its merger efforts earlier this 12 months within the wake of the announcement of a number of giant media acquisitions.

CBS’s swimsuit accuses Ms. Redstone, who’s vice chairman of CBS and Viacom, of interfering with governance on the firm and placing a lawyer who represents the Redstones on its board. She can be accused of looking for to switch CBS Chairman and Chief Govt

Leslie Moonves

and threatening to overtake the CBS board so she will pressure a merger with Viacom.

Ms. Redstone additionally advised a possible acquirer of CBS to not make a proposal, “thereby depriving CBS stockholders of a doubtlessly value-enhancing alternative that the Board or Particular Committee ought to have been free to guage,” the swimsuit mentioned.

The 5 impartial administrators, who’re listed as plaintiffs on the lawsuit together with CBS Corp., are

Bruce S. Gordon,

Gary L. Countryman,

Charles Ok. Gifford,

Linda M. Griego


Martha L. Minow.

If the dividend is authorised, these administrators mentioned in courtroom paperwork, they’re ready to step down from the board and never stand for re-election.

Since starting to ponder a merger earlier this 12 months, CBS, Viacom and Ms. Redstone have been clashing over problems with management and valuation.

CBS needs administration management of the mixed entity, whereas Ms. Redstone had advocated that Viacom CEO

Bob Bakish

have a big working function. Ms. Redstone had lately backed off her demand for an government function for Mr. Bakish that will put him in consideration to be the successor to Mr. Moonves, as an alternative suggesting that he be provided a board seat, in accordance with individuals acquainted with the matter. A board seat for Mr. Bakish was additionally a non-starter for CBS, in accordance with individuals near the corporate.

CBS shares have declined since talks had been rekindled with Viacom, as shareholders query the monetary advantages of buying Viacom’s belongings, which embody about two dozen cable networks and the Paramount Photos studio. Viacom’s inventory has underperformed lately because the media firm tries to enhance its channels’ scores and relationships with pay-TV distributors in addition to rebuild struggling Paramount.

CBS shares rose 2.eight% in midafternoon buying and selling Monday, whereas Viacom dropped 7.1%.

Write to Joe Flint at and Keach Hagey at

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