CBS Sues National Amusements For Voting Control, Stops Viacom Merger

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National Amusements denied it had any plan to oust CBS's board. If the dividend is issued, National Amusements' voting interest would be diluted to under 17 percent.

During the CBS board meeting Thursday, the directors will consider a dividend of Class A shares to Class B shareholders that would dilute National Amusements' voting interest from about 80 percent to 17 percent.

Today, it is the talk of Wall Street, thanks to the filing of a lawsuit in DE by CBS Corp. and its Special Committee of its Board of Directors alleging breaches of fiduciary duty by National Amusements Inc. - the Shari Redstone-controlled entity that controls CBS and Viacom and wants the companies to recombine.

"(CBS is) at least sending the signal and creating evidence they had the best interests of everyone in mind, and not her", said Brian Quinn, a professor at the Boston College Law School, referring to Shari Redstone. CBS is right to defend shareholder value but in doing so it could hurt investors in both companies. The stock decreased 4.90% or $1.48 during the last trading session, reaching $28.74.

The suit, filed with the Delaware Court of Chancery, is seeking to block National Amusements from interfering with a special board meeting. A sticking point in merger talks is what role her handpicked lieutenant - Viacom CEO Bob Bakish - would play.

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.

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A DE court ruled in 2004 that the Hollinger board could dilute Black's voting control in response to what it considered to be the damage he had done to the company.

The lawsuit said Shari Redstone could force a merger by replacing CBS board members.

According to reports, CBS has always been reluctant to do the deal, first starting in 2016, when Redstone initially pushed the idea.

The dividend would not dilute the economic interests of any CBS stockholder, but would help the company to operate as an independent, non-controlled company and fully evaluate strategic alternatives, the company said.

Indeed, CBS shareholders appear to be more content without the weight of a relaunched Viacom to worry about. While there may be an obvious cultural misalignment between Verizon and CBS, a tie-up between the No. 1 US wireless carrier and the TV-network owner would be a natural response to the $109 billion pending merger between their rivals, AT&T Inc. and Time Warner Inc.

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

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