In a move that could challenge the Redstone family's control over CBS Corp., the media company filed a lawsuit against National Amusements Inc., the Redstone-led holding company that controls nearly 80% of the voting stock in both CBS and Viacom Inc.
According to a May 14 news release, the lawsuit accuses National Amusements of breaching its fiduciary duty. The suit also asks the court to block National Amusements from interfering with a special meeting of the board of directors, at which the directors will consider declaring a dividend that would significantly dilute National Amusements' voting power in CBS. Specifically, the directors are looking at declaring a dividend of class A common stock to all of the company's class A and class B stockholders.
If issued, the dividend would dilute National Amusements' voting interest from approximately 79% to 17%. CBS said this move would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.
The lawsuit was filed in Delaware Court of Chancery.
The news comes as National Amusements has been pushing for a recombination of CBS and Viacom. Viacom, according to recent reports, is seeking a bid from CBS that would value the company at about $14.7 billion, about $3 billion higher than the valuation proposed by CBS. With the support of the Redstones, Viacom has also pushed for its current President and CEO Bob Bakish to be named second in command and be in position to succeed CBS CEO and Chairman Les Moonves when he retires. CBS prefers that longtime COO Joe Ianniello serve as No. 2 at the expanded company.
The Wall Street Journal recently reported, however, that National Amusements President Shari Redstone has signaled she is willing to compromise on the leadership question in order to push forward merger talks between the two media companies. She is dropping her demand that Bakish be considered a successor to Moonves, opting instead to delay making a decision on who should lead the combined company after Moonves retires.