NEW YORK — CBS on Monday filed a lawsuit to stop controlling shareholder Shari Redstone continuing with her plan to merge it with Viacom, saying such a deal would harm its shareholders.
The New York media company has also asked the Delaware Chancery Court to block Redstone from interfering at a special meeting of its board on Thursday called to consider the merger.
News of the lawsuit sent CBS shares up nearly 3 percent and Viacom shares down more than 6 percent. Analysts have said a merger would benefit Viacom more than the stronger CBS.
“Ms. Redstone has acted to undermine the (CBS) management team, including, without board authority, talking to potential CEO replacements, deriding the chief operating officer and threatening to change the board,” the lawsuit said.
A representative for Shari Redstone was not immediately available to comment.
At its meeting on Thursday, CBS’s special committee of directors intends to recommend a stock dividend that would dilute National Amusements’s (NAI) voting power to 17 percent from 80 percent.
NAI is a privately held movie theater company owned by Shari and her father Sumner Redstone that controls a majority of the voting shares in both CBS and Viacom.
Sumner Redstone split his media empire into two pieces 12 years ago, creating CBS and Viacom in their present form. Shari Redstone has been pushing plans to reunite them for the last two years.
CBS and Viacom formed special committees to explore the merger in February. Since then, the two sides have argued over price and who will lead the combined company.
The two companies previously explored a merger in 2016 at the urging of Shari and Sumner Redstone, who believe a deal is needed for the two smaller media companies to compete with growing internet powers Netflix and Amazon pushing deeper into the media business.
CBS said in its lawsuit that Shari Redstone had taken actions over the past two years that have led the special committee of the board considering the merger to conclude that she presents a significant threat to the company and its stockholders.
Its proposed dividend would not dilute the economic interests of any CBS stockholder, but would help the company to operate as an independent, noncontrolled company and fully evaluate strategic alternatives, the company said.
CBS’s lawsuit said Redstone rejected an approach by an unnamed potential acquirer of CBS, citing that as another reason her interests are not aligned with other CBS shareholders.
The undisclosed party is Verizon Communications, according to two sources familiar with the situation who requested anonymity to disclose confidential details. A call to Verizon was not immediately returned.