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CBS sues to block effort to 'force' merger with Viacom
[WASHINGTON] US media giant CBS filed suit on Monday, alleging that majority shareholder Shari Redstone is seeking to "force" a merger with rival Viacom on unfavorable terms.
The lawsuit filed in the Chancery Court in the state of Delaware claims "breaches of fiduciary duty" by Shari Redstone and National Amusements Inc. (NAI), the holding company created by her father, 94-year-old Sumner Redstone.
CBS is seeking a temporary restraining order "to protect the status quo and to prevent imminent and irreparable harm" from merging CBS and Viacom, two media groups which were split a decade ago by the elder Redstone.
The lawsuit alleges that Shari Redstone is seeking "to force through a merger of CBS and Viacom on terms that are contrary to the best interests of the public stockholders - without allowing them any voice on the transaction." This effort "would subvert the board-approved Special Committee process" that has been evaluating a tie-up of the two firms, the suit says.
CBS said in February it had established a committee to consider reuniting the two companies, combining CBS with Viacom's networks, which include Nickelodeon, MTV, BET and Comedy Central.
The companies previously explored a combination in 2016, but abandoned the effort.
Shari Redstone, acting on behalf of her father, effectively controls both firms through National Amusements' special voting shares.
CBS has called a special board meeting for Thursday to consider issuing a dividend that would dilute the voting power of the holding company from 79 per cent to 17 per cent.
The dividend "would enable the company to operate as an independent, non-controlled company, and more fully evaluate strategic alternatives," a CBS statement said.
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The lawsuit said Shari Redstone could force a merger by replacing CBS board members.
"If Ms. Redstone can replace Board members or modify the Company's governance documents in the next three days, it is uncertain that the board will be able to protect all stockholders by considering at the next Board meeting whether to take action in response to her threats and breaches of fiduciary duty," the suit alleges.
National Amusements responded by saying it was "outraged" by the CBS lawsuit and its characterization of recent events.
The holding company "had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies," the statement sent to AFP said.
It said it believes the lawsuit was filed because the holding company had expressed concerns over "bullying and intimidation" of a CBS board member, but it did not elaborate.
The lawsuit is the latest drama involving the media-entertainment empire built by Sumner Redstone, whose fitness and mental status have been questioned in legal proceedings.
A separate legal clash ended in 2016 when Viacom chief Philippe Dauman agreed to step down and drop his lawsuit alleging a power grab by Shari Redstone in the absence of her incapacitated father.