This morning, Bernstein analyst Todd Juenger upgraded CBS (CBS) to Outperform and said he views the probability of a CBS-Viacom (VIAB) re-merger as close to zero for many years to come. His peer at Citi voiced a similar opinion and dropped his likelihood of a merger to 25% from 50%. This comes a day after CBS announced that it has filed a lawsuit alleging breaches of fiduciary duty by National Amusements, the parent of both companies which is pushing for a merger of the two.

SUIT AGAINST NATIONAL AMUSEMENTS: Yesterday, CBS and the Special Committee of its Board of Directors announced that they filed a lawsuit in Delaware Court of Chancery alleging breaches of fiduciary duty by National Amusements, and seeking to prevent it from interfering with a special meeting of the Board of Directors, at which meeting the directors will consider declaring a dividend of shares of Class A common stock to all of the company's Class A and Class B stockholders, as is permitted under CBS's charter. The dividend, if issued, would dilute National Amusements' voting interest from approximately 79% to 17%. The dividend would not dilute the economic interests of any CBS stockholder. The Special Committee has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders' interests and would unlock significant stockholder value. If consummated, the dividend would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.

BERNSTEIN SAYS BUY CBS: In a research note to investors, Bernstein's Juenger upgraded CBS to Outperform from Market Perform and raised his price target on the shares to $65 from $56, based on his view that the probability of a CBS-Viacom re-merger is close to zero, for many years to come. The analyst argued that there is further potential upside to CBS if they succeed in diluting National Amusements' voting stake, which would take away the control discount in the stock and/or add an M&A premium to the stock, as the potential would be opened for more strategic options, including the sale of the company. While Juenger remains very concerned about the health of TV networks, generally, and has plenty of specific concerns about CBS, he believes as a standalone entity it has the cleanest story in all of media. Meanwhile, Citi analyst Jason Bazinet dropped his likelihood of a CBS-Viacom merger to 25% from 50% after CBS filed a Delaware lawsuit asking for a restraining order to prevent Shari Redstone from interfering with a special CBS board meeting. The analyst raised his price target on CBS shares to $66 from $61 and lowered his price target on Viacom's stock to $29 from $30.

WHAT'S NOTABLE: After CBS disclosed the interest of another would-be acquirer in court documents, Deadline reported, citing multiple sources, that Verizon (VZ) had been involved in high-level discussions and expressed interest in acquiring the media company before merger talks heated up with Viacom. However, during an interview with CNBC's David Faber, Verizon CEO Lower McAdam said that while Verizon has "looked at" legacy media assets but its focus is on digital. "We looked at legacy over the years and we made a decision to go digital and that's why we bought AOL and we bought Yahoo [...] We had the opportunity to go the linear model, either by purchasing satellite companies or purchasing content companies but that's not our strategy. Our strategy is to get digital content out there over the fastest pipe we can and at the lowest cost possible," McAdam said.

PRICE ACTION: At midday, shares of CBS have gained about 1% to $54.15, while Viacom's class B stock has dropped about 1.5% to $28.30.