(Bloomberg) -- CBS Corp.’s controlling shareholder said it was no longer interested in merging the media company with Viacom Inc., even before CBS filed a lawsuit to fend off a deal.
Officials of a company owned by billionaire Sumner Redstone and his family told Viacom directors earlier this month that their interest had waned in merging the owner of MTV, Comedy Central and Paramount Studios with the U.S.’s most-watched TV network in prime time, according to a suit filed Tuesday by National Amusements Inc.
NAI didn’t “intend to force a CBS/Viacom merger, whether by removing and replacing CBS directors or otherwise,’’ NAI executives said in the Delaware Chancery Court suit. CBS’s board approved a plan to dilute the Redstone’s voting control as a defensive measure against the unwanted Viacom merger.
NAI started to question the “viability and continuing rationale,” of a deal as talks faltered over the management of the new company, with CBS Chief Executive Officer Leslie Moonves reluctant to agree on a role for Viacom CEO Bob Bakish at the combined company, according to the suit. Moonves had wanted CBS Chief Operating Officer Joe Ianniello to be his deputy -- and eventual successor -- in the new company.
CBS in an amended suit filed last week detailed the ways in which NAI “misused its power to the detriment of CBS shareholders," according to a company statement Tuesday. “We continue to firmly believe in our position.”
The court filings are the latest maneuvers in the battle over CBS, which pits Moonves, the company’s chief executive, against Shari Redstone, president of NAI, which holds voting control of CBS and owns Viacom. She’s Redstone’s daughter.
Shari Redstone asked the boards to explore a merger in late 2016, only to shelve the idea after meeting resistance. After waiting a little over a year, she pushed the companies to try again. A CBS board committee rejected the overture, according to CBS’s court filings.
NAI’s countersuit claims CBS and its directors took “extraordinary, unjustified and unlawful actions” by voting to to dilute the rights of Redstones and seeks a court order declaring the move invalid.
“The only cogent, but manifestly improper, explanation for the director defendants’ unprecedented action is that Leslie “Les” Moonves, CBS’s long-time CEO, has tired of having to deal with a stockholder with voting control and has taken particular umbrage the exercise of stockholder’s control has migrated from Sumner Redstone to his daughter,” according to the suit.
NAI officials contend Moonves gave CBS directors an ultimatum that unless they targeted the Redstones’ voting control, he’d leave and demand his $180 million “golden parachute” compensation package, according to the complaint. The suit also reveals that the Redstone family offered to consider giving up voting control in the future if CBS agreed to a Viacom merger engineered to strengthen both companies.
“NAI and Ms. Redstone have made clear, including explicitly to Mr. Moonves, that they are open to eventually relinquishing NAI’s voting control,” NAI said in the suit. The idea was to create a company that would be more attractive to an acquirer and “fetch an attractive premium that neither CBS nor Viacom alone could command.”
The suit also details contacts Redstone had with Verizon Communications Inc. officials in 2017 and denies the executive tried to warn the U.S.’s largest telecommunications provider from making a bid for CBS. NAI officials said that during those talks, Shari Redstone made it clear “she wasn’t interested in giving up voting control of either CBS or Viacom,” according to the filing.
Verizon representatives declined to comment.
The case is CBS v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).
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