(CN) – Viacom did not breach its duty to its shareholders when it split from Blockbuster in 2004, the Delaware Supreme Court ruled.
Beverly Pfeffer brought a shareholder class action before the Court of Chancery. She challenged Viacom chairman Sumner Redstone, and the leaders of National Amusements Inc. and CBS Corp., over two transactions:
– A special $5 dividend paid to Blockbuster stockholders; and
– A later offer to Viacom stockholders to exchange their stock for shares in Blockbuster.
Redstone and CEO John Antioco said at the time that the two companies would perform better as separate entities.
Pfeffer and some other Viacom stockholders took advantage of the exchange offer, but Blockbuster struggled to make a profit.
Pfeffer argued that NAI’s and Redstone’s interests in Viacom required her case to be reviewed under an entire fairness standard.
The chancery court did not agree, and neither did Justice Steele.
“Although Viacom made the exchange offer to its minority stockholders,” Steele wrote, “the Viacom board did not recommend in the prospectus that those stockholders exchange their shares.
“The exchange offer was purely voluntary,” Steele added, “and the prospectus clearly disclosed that NAI would not participate in the exchange offer.”