CBS and the Redstones may want to book Judge Judy

Gladys Abbott
May 15, 2018

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.

Redstone indicated that she would see greater value in a Verizon bid for both CBS and Viacom - a position that some saw as chilling interest in a potential deal.

CBS is seeking to call a special board meeting on May 17 at which directors will consider declaring a dividend of shares of Class A common stock to all the company's Class A and Class B shareholders.

CBS Corp filed a lawsuit on Monday to reduce the voting power of controlling shareholder National Amusements Inc, the movie theatre company owned by Sumner and Shari Redstone, in an act of defiance aimed at thwarting the Redstones' plan to merge CBS with Viacom Inc. CBS alleges that Redstone shooed away an interested buyer, reportedly Verizon Communications Inc. With Monday's Closing Bell on Wall Street, CBS shares were up $1.14 to $53.66 - their highest close since April 4.

Viacom has made it no secret that it wants Moonves at the helm of a combined company, but the talks between the two have hit an impasse regarding the line of succession.

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But CBS, led by its chairman Leslie Moonves, has chose to put up a fight with a high-stakes gambit that could forever change authority at CBS by shifting power from the Redstones to public shareholders. 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 a sign that CBS is keeping the door open to negotiations with Redstone, CBS said in its lawsuit that if it is granted an injunction against Redstone, it would agree not to issue the dividend once it approves it, pending further orders from the court.

According to reports, CBS has always been reluctant to do the deal, first starting in 2016, when Redstone initially pushed the idea. 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 US wireless carrier Verizon Communications Inc, according to two sources familiar with the situation who requested anonymity to disclose confidential details.

Analysts have said a merger would benefit Viacom more than the stronger CBS. "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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