CBS sues key investor over Viacom merger

CBS’ special committee will meet on May 17 to discuss its options

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

Verizon had expressed interest in acquiring CBS before merger talks heated up with its corporate sibling Viacom, sources say.

U.S. media giant CBS filed suit on Monday, alleging that majority shareholder Shari Redstone is seeking to "force" a merger with rival Viacom on unfavorable terms. On Friday, CBS will hold its annual shareholders meeting.

"We do believe that in a consolidating media industry the unique assets at both CBS and Viacom could drive meaningful premiums to their current trading values, especially if, as we expect, Time Warner/AT&T are successful in defeating the DOJ's antitrust lawsuit to stop the merger", Crockett wrote.

This surprising turn of events comes after CBS, Viacom and National Amusements spent months discussing a potential remerger of CBS and Viacom, approximately 12 years after the companies first split.

CBS has requested a temporary restraining order to prevent Redstone from interfering with a special meeting of the company's board directors on Thursday, at which CBS plans to propose a Class A common stock dividend that would dilute Redstone's National Amusements' voting interest from approximately 79 to 17 percent.

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"The Special Committee has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders' interests and would unlock significant stockholder value", CBS said.

The lawsuit said Shari Redstone could force a merger by replacing CBS board members.

In a statement, NAI said it had no intention of forcing a deal that did not have the support of both companies.

If the dividend is approved, National Amusements' voting rights in CBS would shrink to about 17 percent from about 80 percent, more in line with National Amusements' economic stake in CBS of 10.3 percent, according to CBS's lawsuit, filed with the Court of Chancery in Delaware. Shari Redstone has indicated before that she wants Viacom CEO Bob Bakish to become the combined company's second-in-command.

With Monday's Closing Bell on Wall Street, CBS shares were up $1.14 to $53.66 - their highest close since April 4.

News of the lawsuit sent CBS shares up almost 3 percent and Viacom shares down more than 6 percent.

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