The battle for the future of CBS and Viacom has taken an extraordinary turn when CBS Corp. filed an action challenging majority shareholder Shari Redstone for violating her fiduciary duty to CBS shareholders by urging a merger of CBS board members
CBS filed suit on Monday with the Delaware Court of Chancery to dilute the preferred stock of Redstone and its National Amusements holding company to prevent them from replacing board members to complete the Viacom CBS deal
CBS applies for a restraining order in which Redstone, President of National Amusements and vice chairman of CBS and Viacom is, "the election controls (National Amusements) abused and CBS and its public shareholders in violation of their trustee further harms duties," according to the complaint.
CBS calls for a special board meeting on Thursday for the directors to vote on a proposal to dilute a special sto ck dividend that would reduce the preferred voting power that National Amusements holds in CBS from 79% to approximately 1
The lawsuit has disproved the steps Redstone has taken with other CBS Board members and CBS management, led by Chairman-CEO Leslie Moonves.
"Ms. Redstone has undermined the management team, including without board responsibility, discussions with potential CEO replacements, ridicule over the Chief Operating Officer and threatened to change the board, and these escalating attacks make it difficult for management to complete its duties to fulfill and threatens the continuity of the management ", so the suit state.
The lawsuit alleges that Redstone's actions and the uncertainty caused by Viacom's merger proposal are responsible for a $ 7 billion decline in CBS's market capitalization over the last few months.
A representative for Redstone could not be reached immediately for a comment. Viacom declined to comment.