In a securities filing, the company revealed that it has agreed to settle the class action litigation now pending in the Delaware Court of Chancery. The settlement still requires judicial approval.
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The plaintiffs had alleged that Paramount Global’s chairwoman, Shari Redstone, ousted board members in a “tyrannical” effort to merge the two companies. The suit alleged that CBS stock was overpriced in the merger, and that Viacom was undervalued, causing harm to Viacom shareholders.
The suit alleged that Redstone’s handpicked board members were conflicted, and did not pursue the best price on behalf of Viacom’s minority shareholders. When the merger was first contemplated in 2018, the suit alleged that Viacom was given an implied value of $12.8 billion. That effort collapsed, but the companies tried again a year later.
By that point, according to the suit, Viacom’s fortunes had improved, but the merger’s exchange ratio implied a value of just $11.8 billion — $1 billion less than it was worth a year earlier.
Discovery was underway and a trial was scheduled to begin in July.
CalPERS, the state pension fund, is the lead plaintiff in the case. A Delaware judge consolidated four separate Viacom shareholder suits into one in 2020.
Matthew Jacobs, the general counsel of CalPERS, said in a statement Friday afternoon that the case underscores the problems with dual class share structures. Leading up to the merger, Redstone controlled both Viacom and CBS through National Amusements Inc., which controlled more than 80% of the voting power in both companies despite owning only 10% of the economic interest.
“CalPERS believes that this settlement — one of the largest class action settlements in Delaware history — confirms our decision to take action against controller overreach and to rectify the harm suffered by Viacom’s unaffiliated stockholders,” Jacobs said.
Joseph Slights, a former vice chancellor, refused to dismiss the case in December 2020. At the time, he called it one of the most “hotly contested instances of alleged controlling stockholder self-dealing in recent memory.”
In the securities filing, Paramount Global said that the company is still fighting its insurers in Delaware Superior Court over coverage issues. According to the filing, the “vast majority” of the settlement payment will be due no less than five days before the final settlement hearing.
Paramount Global is facing a separate consolidated class action from CBS shareholders, which is also pending in the Delaware Court of Chancery. That lawsuit also challenges the merger and claims that Joseph Ianniello, the former acting CEO of CBS, was given a $125 million severance to buy his support for the merger. That case is scheduled to go to trial in June.
“We believe that the remaining claims are without merit and we intend to defend against them vigorously,” Paramount Global said in its annual report last month.
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