CBS declares war on Shari Redstone over Viacom merger

CBS’ special committee will meet on May 17 to discuss its options

"Ms. Redstone, through her recently-obtained domination and control of [National Amusements], has taken actions over the past two years that have led the Special Committee to conclude that she presents a significant threat of irreparable and irreversible harm to the Company and its stockholders", said the lawsuit, filed Monday in Chancery Court in Delaware. But, it would greatly reduce Redstone's power to demand a recombination of Viacom and CBS, which has weighed heavily on CBS shares. Should the CBS board declare the dividend, it would dilute National Amusements' voting interest from approximately 79% to 17%.

"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".

NAI is the parent company of both CBS and Viacom, which were separated by Sumner Redstone in 2005. Redstone filled Sumner Redstone's newly vacant board seat with the Redstones' personal lawyer, who has since been instructing management and other directors on Ms. Redstone's and National Amusements' wishes, including the desire to replace certain directors.

Shares of CBS were up more than 3 percent in morning trade on May 14 while Viacom shares declined almost 7 percent.


Hanging in the balance is a potential merger between CBS and Viacom, two companies controlled by the Redstones.

Redstone wants the two companies to combine, and this is the second time in two years that she has tried to make a merger happen. Shari Redstone has indicated before that she wants Viacom CEO Bob Bakish to become the combined company's second-in-command.

The companies have been in discussions about a merger since February but talks stalled over the price and who will sit on the combined board of directors. Although NAI holds voting power in CBS, it only owns just over 10 percent of the economic interest in CBS.

On Monday CBS asked a DE court for a temporary restraining order that would prevent the Redstones from exerting their influence and allow the board to vote through a measure that would mute the Redstone holding. CBS is right to defend shareholder value but in doing so it could hurt investors in both companies.

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