Combine the two and sell to the highest bidder. Verizon had flagged interest in Viacom as well as CBS, according to sources.
The bitterest boardroom battle in recent memory has turned on a series of slights, verbal jousting and a physical altercation involving hands on a face that could determine the futures of both CBS and Viacom.
Shari Redstone, the controlling owner of CBS, has filed a complaint against the broadcaster and its chief executive Les Moonves in Delaware Chancery court, outlining her version of events in a saga that has pit the former allies against each other.
The filing further reveals Redstone’s master plan for CBS and Viacom, which also falls under her control. After a merger of the two, she proposes selling the united company for a much larger sum than either would fetch separately. She had tinkered with the idea for at least a year, according to sources, but this is the first public indication of that strategy.
From the complaint:
“Ms. Redstone discussed NAI’s long-term plans for CBS, focusing on a two-step process starting with a merger with Viacom that would strengthen both entities, and continuing thereafter with a sale or merger of the stronger combined entity, with NAI open to the possibility of relinquishing its voting control as part of that second transaction.”
Moonves was receptive to Redstone’s plan when she discussed it with him in the second half of last year, people familiar with the meeting say. As of January, he was still “supportive of a possible merger of CBS and Viacom,” according to her complaint.
People close to Moonves dispute the characterization of those meetings, saying the idea of selling a merged CBS and Viacom did not figure into their discussions.
Faced with declining sales at Viacom and the disintegration of the larger media industry under the weight of Facebook and Google’s growing dominance over audiences and advertisers, Redstone felt it was more urgent to consolidate that business with the more successful CBS, several sources say.
Redstone has said publicly she would only proceed with a merger if both companies enthusiastically supported the deal. She felt a combination would benefit CBS and Viacom since a bigger company would benefit from better negotiating leverage in any possible deal discussions.
She would also be willing to give up her control of the companies after a potential sale, according to the complaint.
This month, CBS filed a lawsuit against Redstone, and its board voted to remove her control of the company to prevent her from forcing through a merger with Viacom. CBS alleges Redstone was planning to remove board directors to pave the way for a deal. The outcome of the dueling complaints and CBS’s lawsuit will be determined in court, likely this summer. A date has yet to be set.
Redstone failed to unite the two companies in an attempt two years ago, but the idea for the merger reignited last summer when Verizon CEO Lowell McAdam approached Redstone about a possible deal for CBS. At the time, he had also mentioned interest in some parts of Viacom, people familiar with the matter say. Verizon did not immediately respond to request for comment. Other tech and telecom companies had separately approached Redstone about CBS, the Wall Street Journal reported this week.
Redstone has said she had no intention of replacing board directors to merge CBS with Viacom and had recommended against the deal a week prior to CBS’s lawsuit, according to her complaint. The filing challenges CBS’s version of the timeline.
The broadcaster and its board called Redstone’s court filing “not unexpected,” and went on to state, “We continue to believe firmly in our position.”
This isn’t the first time Redstone has changed her mind on the merger. In 2016 she asked the boards of CBS and Viacom to consider a deal, but changed tack after determining the two companies would be more valuable as separate entities.
“The change for me was, ‘Oh my god, there is potential here, there is opportunity here, we can do this,’” she said onstage at Code conference in 2017. She had helped install a new management team at Viacom that prompted her to revise her vision for the company as a standalone.
In her complaint filed today, however, she indicated CBS’s lack of interest in the merger meant any discussions on the matter “were no longer productive.”
Sources say that in 2016, Redstone had decided that both CBS’s reluctance and the higher potential value as separate companies led to her pivot.
A major sticking point at the time had been Moonves’s demand for autonomy over any combined company; he asked for her assurance she would vote his way on all corporate matters, at which she balked, sources said at the time.
Redstone also cited the actions of CBS board director Charles Gifford, whom she had moved to remove from the board following several incidents, according to today’s filing.
In both 2016 and 2017, Gifford “had acted in an intimidating and bullying manner, including on one occasion by grabbing her face and directing her to listen to him,” her complaint read.
Redstone preferred to handle the matter by not renominating him to the board.
“Gifford later told her that he meant no offense, and that was how he treats his daughters when he wants their attention,” a footnote in the complaint read. “Ms. Redstone clarified that she was not Mr. Gifford’s daughter but instead the Vice Chair of CBS.”
In a statement, CBS called Redstone’s allegations “baseless” and that her “issue with Mr. Gifford is that he has always operated by an entirely different definition of what it means to be an independent director — namely to act in the best interest of all CBS shareholders.”
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