A Delaware choose has allowed CBS stockholders to sue over the 2019 merger of Viacom and CBS, discovering an inexpensive declare that former CBS chief Joseph Ianniello “bought” his help for the deal to Shari Redstone in change for a $125 million payout.
Ianniello was president and chief working officer beneath former CEO Les Moonves, and he sided with Moonves in making an attempt to dam the merger, arguing it could be dangerous for CBS. Redstone owned a controlling stake in each corporations by Nationwide Amusements Inc., and was searching for to mix them to realize better scale.
However after Moonves’ ouster over misconduct allegations in September 2018, Ianniello had a change of coronary heart. As performing CEO of CBS, he supported the merger. He left shortly after it was full, taking the $125 million severance.
A bunch of CBS shareholders filed swimsuit final April, accusing Redstone of losing the corporate’s cash, and of inflicting CBS to overpay for Viacom, which even she acknowledged was “tanking.”
Vice Chancellor Joseph Slights of the Delaware Chancery Court docket allowed the case to proceed on Wednesday, rejecting motions from Ianniello and ViacomCBS to dismiss it.
Within the 159-page ruling, Slights famous that Redstone had been important of Ianniello’s compensation bundle — which included a $60 million severance provision — when Ianniello was making an attempt to dam the merger. However as soon as he switched sides, the choose wrote, Redstone endorsed his pay bundle and supported giving him tens of thousands and thousands extra.
“Each Ianniello’s and Ms. Redstone’s 180-degree change from their prior positions help affordable inferences that Ianniello’s enriched severance compensation was a quid professional quo and that he violated his fiduciary responsibility, with the Director Defendants’ assist, by giving his loyalty to Ms. Redstone in return,” Slights wrote. “By promoting his endorsement for the Merger — which Plaintiffs nicely plead Ianniello knew was dangerous for CBS stockholders — Ianniello conceivably violated his fiduciary responsibility of loyalty.”
Ianniello has disputed this, noting that as a CBS shareholder his incentives had been aligned with these of the plaintiffs. However in a footnote, the choose mentioned he was unpersuaded.
“At this stage, Ianniello has provided no foundation that might enable the Court docket to disclaim Plaintiffs the affordable inference that his contractual incentive to help the allegedly unfair merger overpowered his counteracting incentive as a stockholder to help solely a good merger,” Slights wrote.
Final month, Slights additionally allowed Viacom shareholders to proceed with a separate swimsuit difficult the merger.
In every case, the stockholders argue that Shari Redstone disregarded their pursuits when she put in loyal board members at CBS and compelled the merger.