Paramount Global has agreed to pay $122.5 million to settle a 3-year-old lawsuit brought by several major investment funds that believed the company pushed through the 2019 merger of Viacom and CBS at the expense of minority shareholders.
The settlement, revealed in a financial filing by Paramount, marks the resolution of the lawsuit filed in the Delaware Chancery Court.
The plaintiffs argued that the company’s controlling shareholder, Shari Redstone, now chairman of Paramount Global, breached her fiduciary duties by filling Viacom’s board with friends and allies so she could push through her merger agenda.
The lawsuit argued that the merger between Viacom and CBS was done to protect the fortunes of the Redstone family and its investment vehicle, National Amusements Inc., rather than ordinary CBS stockholders. Under the nearly $12 billion deal, CBS, the top-rated television network, combined with the smaller Viacom, which owned brands like MTV, Nickelodeon, Comedy Central and Paramount Pictures.
CBS and Viacom first merged in 2000. But the companies separated in 2006 when Sumner Redstone, Shari’s father, feared that the challenges faced by CBS’ broadcasting business would slow the share’s growth. CBS turned out to be the most prosperous company in the years that followed.
The Redstone family controlled nearly 80% of the voting stock of both Viacom and CBS. The merged company was renamed Paramount Global in 2022.
A Delaware judge must approve the settlement reached earlier this week, the filing shows. Several lawsuits brought by disgruntled groups of Viacom shareholders were consolidated into a single case by the court.
CBS and Viacom were collectively worth more than $30 billion before the merger was announced in mid-2019. But, like other traditional media companies, Paramount Global has had its shares hammered by a financial market correction.
After the merger, the company posted weak earnings, exacerbated by the coronavirus outbreak. On Friday, the price of Class B shares of Paramount Global stock closed at $22.60 and is down 33% over the past year.