Judge Allows Suit Accusing CBS Chief of Backing Viacom Merger for $125 Million Payout
A Delaware judge has allowed CBS stockholders to sue over the 2019 merger of Viacom and CBS, finding a reasonable claim that former CBS chief Joseph Ianniello “sold” his support for the deal to Shari Redstone in exchange for a $125 million payout.
Ianniello was president and chief operating officer under former CEO Les Moonves, and he sided with Moonves in trying to block the merger, arguing it would be bad for CBS. Redstone owned a controlling stake in both companies through National Amusements Inc., and was seeking to combine them to achieve greater scale.
But after Moonves’ ouster over misconduct allegations in September 2018, Ianniello had a change of heart. As acting CEO of CBS, he supported the merger. He left shortly after it was complete, taking the $125 million severance.
A group of CBS shareholders filed suit last April, accusing Redstone of wasting the company’s money, and of causing CBS to overpay for Viacom, which even she acknowledged was “tanking.”
Vice Chancellor Joseph Slights of the Delaware Chancery Court allowed the case to proceed on Wednesday, rejecting motions from Ianniello and ViacomCBS to dismiss it.
In the 159-page ruling, Slights noted that Redstone had been critical of Ianniello’s compensation package — which included a $60 million severance provision — when Ianniello was trying to block the merger. But once he switched sides, the judge wrote, Redstone endorsed his pay package and supported giving him tens of millions more.
“Both Ianniello’s and Ms. Redstone’s 180-degree change from their prior positions support reasonable inferences that Ianniello’s enriched severance compensation was a quid pro quo and that he violated his fiduciary duty, with the Director Defendants’ help, by giving his loyalty to Ms. Redstone in return,” Slights wrote. “By selling his endorsement for the Merger — which Plaintiffs well plead Ianniello knew was bad for CBS stockholders — Ianniello conceivably violated his fiduciary duty of loyalty.”
Ianniello has disputed this, noting that as a CBS shareholder his incentives were aligned with those of the plaintiffs. But in a footnote, the judge said he was unpersuaded.
“At this stage, Ianniello has offered no basis that would allow the Court to deny Plaintiffs the reasonable inference that his contractual incentive to support the allegedly unfair merger overpowered his counteracting incentive as a stockholder to support only a fair merger,” Slights wrote.
Last month, Slights also allowed Viacom shareholders to proceed with a separate suit challenging the merger.
In each case, the stockholders argue that Shari Redstone disregarded their interests when she installed loyal board members at CBS and forced the merger.
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