CBS sues Shari Redstone as it moves to lessen her control

CBS Sues Controlling Shareholder National Amusements Accuses Shari Redstone Of Undermining Board

CBS Sues Controlling Shareholder National Amusements Accuses Shari Redstone Of Undermining Board

It's shaping up to be a headline-grabbing week for CBS Corp.

As permitted under CBS' charter, the network says it could declare a dividend of shares of Class A common stock to all the Company's Class A and Class B stockholders.

Shari Redstone sits on the boards of CBS and Viacom, and is the president of National Amusements, the movie theater chain through which her family controls those two media companies. During the course of the special committee's negotiations regarding a possible merger, the suit alleges that Ms. Redstone refused to agree to typical public company governance or submit any potential transaction to a vote of all of the unaffiliated public stockholders of CBS.

National Amusements, the investment vehicle controlled by the Redstone Family, owns almost 80 percent of Class A voting shares.

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It then lists a number of ways that Shari has allegedly abused her power to undermine the board and hijack control for herself and National Amusements.

CBS said in its lawsuit it is seeking to prevent the Redstones from ousting any directors or changing the company's bylaws before its full board meets on Thursday to consider issuing a dividend that would curb National Amusements' voting power.

That dividend would dilute National Amusements' (and Shari Redstone's) voting interest to about 17% from a current 79%. The move would allow the company to "more fully evaluate strategic alternatives".

On Monday CBS asked a DE court for a temporary restraining order that would prevent the Redstones from exerting their influence and allow the board to vote through a measure that would mute the Redstone holding.

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National Amusements reacted by saying it is "outraged" that CBS would file a lawsuit, noting that it has "no intention of replacing the CBS board or forcing a deal that was not supported by both companies".

The talks, however preliminary, provide a backdrop for the CBS-Viacom merger discussions.

The agreed upon price was a ratio of 0.6135 CBS shares for every Viacom class B share.

CBS said in its lawsuit that Shari Redstone had taken actions over the past two years that have led the special committee of the board considering the merger to conclude that she presents a significant threat to the company and its stockholders.

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