Published: Tue, May 15, 2018
Finance | By Loren Pratt

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

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

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.

In a plan that would radically dilute Redstone's stake in the company from 79% to 17% (and her influence over merger negotiations), CBS is planning to hold a special shareholder meeting on Thursday to approve a dividend declaration.

"In a move that escalates an internal battle for control, CBS has filed a lawsuit in Delaware Chancery Court against Shari Redstone, Sumner Redstone and National Amusements, Inc., now the controlling stakeholder for CBS", The Hollywood Reporter's THR, Esq., reports. CBS alleges that Redstone shooed away an interested buyer, reportedly Verizon Communications Inc. CBS is right to defend shareholder value but in doing so it could hurt investors in both companies. With Monday's Closing Bell on Wall Street, CBS shares were up $1.14 to $53.66 - their highest close since April 4.

It was the second attempt in three years by Shari Redstone to merge CBS and Viacom, after her father separated them 12 years ago. The talks, that started in February, had hit an impasse over disagreements about price as well as the role of Viacom Chief Executive Bob Bakish in the combined company, sources said earlier this month.

National Amusements believes a deal is needed for the two media companies to gain scale and compete with growing internet powers Netflix Inc and Inc pushing deeper into the media business. On Friday, CBS will hold its annual shareholders meeting. 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.

In its suit, CBS also asked the court to issue a restraining order so that Redstone can't overthrow the CBS board, which has a crafty plan to issue a stock dividend to substantially reduce the Redstones' influence and effectively kill any hope for a CBS-Viacom deal.

It goes on to explain: 'If consummated, the dividend would enable the Company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives'.

The undisclosed party is USA wireless carrier Verizon Communications Inc, according to two sources familiar with the situation who requested anonymity to disclose confidential details. "With the expectation that the Redstones may attempt to interfere with the planned meeting, CBS in a preemptive measure is demanding a temporary restraining order from a DE judge".

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