Viacom Hit by Blockbuster Class-Action Suit8 Aug, 2006 By: Erik Gruenwedel
A former Viacom Inc. shareholder has reportedly filed class-action lawsuit against the media conglomerate seeking unspecified damages as a result of its stock spin-off of Blockbuster Inc. in 2004.
The suit, filed last week in the Court of Chancery in Delaware by Beverly Pfeffer, alleges that Viacom founder and chairman Sumner Redstone jettisoned the Dallas-based video rental company in order to benefit financially from Viacom's $738 million share of the $900 million Blockbuster paid to its former parent, according to the Associated Press.
The suit claims Redstone knew Blockbuster was in no position to take on $900 million in debt and that minority Viacom shareholders who swapped their shares for Blockbuster stock were mislead.
The suit says Big Blue's shares fell more than 45% in value last year thereby diminishing the actual value of the stock spin-off.