CBS Board Seeks Restraining Order to Dilute Redstone Shares, Trying to Fend Off Viacom Deal

CBS and a committee of its board filed a lawsuit and motion for a temporary restraining order seeking to prevent controlling stockholder National Amusements from “interfering with a special meeting of the Board of Directors” that would redistribute CBS stock to dilute National Amusement’s voting interest, the broadcaster said in a release Monday. Shari Redstone controls National Amusements. The dividend “would dilute National Amusements, Inc.’s voting interest from approximately 79% to 17%,” the release said. The court documents were filed in Delaware Court of Chancery. The special committee was formed in response to the proposed combination of National Amusements-owned Viacom and CBS, and voted Sunday that the proposed deal isn’t in CBS’s interests, the motion said. “The Special Committee believes that the Company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone’s potential response to the Special Committee’s unanimous decision.” Such a significant change in ownership of a company that controls numerous broadcast licenses is likely to require FCC approval, broadcast attorneys told us. The suit makes it less likely that CBS will buy Viacom, Citibank analyst Jason Bazinet emailed investors. It appears "CBS management and part of the board has effectively decided either to take control away from the Redstones and chart their own course or to in effect be removed,” Barclays' Kannan Venkateshwar emailed. “If the restraining order is allowed by the court, the CBS board is likely to vote on the new shares on Thursday, but the shares won’t be issued till a decision is laid out on the lawsuit itself," Venkateshwar said. “For both CBS and Viacom, this lawsuit is likely to result in a period of uncertainty and a lack of closure one way or the other for some time,” the analyst said. “The lawsuit may take about six months to resolve itself.”