CBS Investors’ Viacom-Merger Suit Can Proceed, Judge Says

(Bloomberg) -- CBS Corp. shareholders who allege they were treated unfairly in the $11.7 billion merger with Viacom Inc. can press forward with a lawsuit over their losses, a judge concluded.

Delaware Chancery Court Judge Joseph Slights III ruled Wednesday that pension funds had raised legitimate questions about the fairness of the 2019 merger engineered by media mogul Shari Redstone, head of Viacom and a CBS board member. She is the daughter of the late billionaire Sumner Redstone, who owned both companies.

Facts presented by the investors “support a reasonable inference the merger was not entirely fair to CBS,” Slights said in a 157-page ruling. Last month, Slights cleared the way for some Viacom investors to sue over the deal.

New York-based ViacomCBS has been shedding jobs and paring assets over the two years since the merger. That includes agreeing to sell the Simon & Schuster book-publishing business to Bertelsmann SE for $2.18 billion in November. Though the shares slid 11% last year, investors have grown more bullish in recent weeks, partly because of the company’s prospects in streaming. Its re-branded service Paramount+ is set to launch in March, offering a beefed-up competitor to Netflix Inc.

Earlier this week, CBS officials placed two senior television executives on leave after the Los Angeles Times detailed allegations that they engaged in racist and sexist workplace behavior. Peter Dunn, president of CBS TV stations, and David Friend, senior vice president, are suspended pending the results of a probe into the conduct, the network said.

Justin Dini, a ViacomCBS spokesman, didn’t immediately return an email for comment Wednesday on the judge’s ruling.

The merger was the long-sought reunion of CBS and Viacom, which had been one company until a 2006 breakup. Shari Redstone engineered the deal despite vehement opposition from CBS executives. The combination re-joined the most-watched TV network in the U.S. with the parent of Paramount Pictures and cable channels such as MTV and Nickelodeon.

Pension funds that invested in CBS accused Shari Redstone of persistently pursuing the combination to advance her interests in enhancing Viacom’s value. They alleged she packed the CBS board with her allies and those board members failed to protect the interests of minority shareholders.

The funds presented credible facts showing the new CBS directors “acceded to her will at every turn in a sharp departure from CBS boards of the recent past,” Slights said. That provided benefits to Shari Redstone that came at the detriment of CBS shareholders, he said.

The case is In RE CBS Corporation Stockholder Class Action, 20-0111, Delaware Chancery Court (Wilmington)

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