CBS board challenges Redstone control in amended lawsuit

CBS filed a new complaint Wednesday seeking to wrest control of the media group from controlling shareholder Shari Redstone, accusing her of trying “reap private benefits” at the expense of other stockholders.

The revised complaint from the CBS board of directors comes days after a judge backed Redstone and rejected an effort by the board to block her from interfering with an evaluation of a potential merger with media rival Viacom.

The lawsuit in Delaware Chancery Court claims that Shari Redstone, acting for her father Sumner Redstone through the family holding company National Amusements Inc, appears intent on pressing ahead with the deal for Viacom, which she also controls.

CBS asked the court to nullify Redstone’s change in the bylaws which would require 90 percent approval by the shareholders, allowing her to effectively veto any board action.

Viacom reunion

The complaint said that despite her promises to the contrary, Redstone is on a path to reunite CBS and Viacom, which split in 2005, and could use her supermajority in voting shares to replace board members opposing her.

The family holding company owns around 10 percent of the equity of CBS but its special voting shares give it approximately 80 percent of the voting power. A similar plan is in effect at Viacom.

“She has sought to combine CBS and Viacom regardless of the strategic and economic merits of the transaction and to the exclusion of considering any other potential transaction,” the complaint said.

It added that a special committee formed to consider the deal determined earlier this month “that a CBS/Viacom merger is not in the best interests of CBS stockholders” other than the Redstone family.

Shari Redstone and National Amusements, according to the complaint, have violated their fiduciary duty to shareholders by their actions.

Failed loyalty

They have failed, the suit continued, to live up to the “uncompromising duties of loyalty and good faith that preclude them from profiting inequitably at the expense of the company or its other public stockholders.”

National Amusements, which has defended the corporate structure, said in response the latest filing that it “exercised its legal right to amend CBS’ bylaws and this change was effective immediately.”

“We are confident the court will uphold NAI’s action,” the statement added.

The lawsuit is the latest drama involving the media-entertainment empire built by Sumner Redstone, 94, 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.

CBS, which operates one of the largest US broadcast TV network, the Showtime channel and controls Australia’s Network Ten, has resisted efforts to merge with struggling Viacom, whose brands include Nickelodeon, MTV, BET and Comedy Central and Paramount Pictures.