The dollars 5.4bn ( pounds 3.5bn) deal will place Mr Diller at the head of the network, which has suffered a series of setbacks at the hands of News Corporation in recent months. But analysts say the announcement may just be the opening shot in a long bidding war that could rival Mr Diller's unsuccessful dollars 10bn fight for control of Paramount Communications.
Yesterday's deal would give Mr Diller's QVC home-shopping channel a 49 per cent interest in the new company, and would pay CBS's current owners a special dividend of dollars 87.50 for each of their shares. CBS's chief executive and largest shareholder, Laurence Tisch, would receive some dollars 528m in cash and would retain a 10 per cent stake in the new company.
Mr Diller would own 5 per cent of the company, as would his two main partners in QVC, cable TV operators Tele-Communications Inc and Comcast.
The deal is seen as important for CBS, which has lagged behind in diversifying into cable and other businesses since Mr Tisch took control in 1985. While home-shopping is only a small part of the multi-media future many are predicting, Mr Diller's skills as an entertainment executive are legendary.
He is given most of the credit for Fox's success in establishing itself as a rival to America's three traditional broadcast networks. Mr Diller, who parted ways with News Corp's chief executive Rupert Murdoch two years ago, is expected to rejuvenate CBS.
But some analysts say yesterday's announcement simply puts the network 'in play', drawing out a host of rival bidders that could include Turner Broadcasting, Disney, Time Warner, Capital Cities/ABC, Viacom and perhaps News Corp itself.