The CBS-Viacom remerger drama has taken a turn toward all-out war today as CBS filed a lawsuit against majority owner National Amusements after deciding against merging with Viacom.
The suit, filed with the Delaware Court of Chancery, is seeking to block National Amusements from interfering with a special board meeting. At that meeting, CBS is expected to propose a Class A common stock dividend that would dilute National Amusements’ voting interest from approximately 79% to 17%.
“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. If consummated, the dividend would enable the Company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives,” CBS wrote in a release.
CBS’ special committee will meet on May 17 to discuss its options.
“The Special Committee believes that the Company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone’s potential response to the Special Committee’s unanimous decision yesterday, May 13, 2018, that the proposed Viacom transaction is not in the best interests of CBS stockholders (other than NAI),” CBS wrote in its lawsuit (PDF).
CBS went on to accuse Redstone of interfering with the CBS board nomination process, of acting to undermine CBS’ “highly lauded and successful management team in a series of escalating attacks,” and blocking another unnamed acquisition partner from pursuing a deal with CBS.
National Amusements refuted CBS's claims and the temporary restraining order that CBS requested is due to National Amusements raising concerns about incidents of bullying and intimidation in relation to one CBS director, dating back to 2016.
“National Amusements (NAI) is outraged by the action taken by CBS and strongly refutes its characterization of recent events. NAI had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies. NAI’s conduct throughout supports this, and reflects its commitment to a well-governed process," National Amusements said in a statement. "Ensuring the long-term success of CBS continues to be NAI’s sole interest. This precipitous lawsuit, and the efforts of CBS management and its “independent” directors to wrest voting control from NAI, are outrageous. We intend to defend our position vigorously and look forward to presenting our arguments in court.”
This surprising turn of events comes after CBS, Viacom and National Amusements spent months discussing a potential remerger of CBS and Viacom, approximately 12 years after the companies first split.
Sticking points in the negotiations included leadership structure for the combined company. National Amusements’ Shari Redstone was reportedly pushing for Viacom CEO Bob Bakish to be installed a chief operating officer of the combined company, while CBS CEO Les Moonves reportedly wanted to keep his current COO, Joe Ianniello.
This article was updated to add comment from National Amusements.