CBS Board Votes in Favor of Diluting Control of National Amusements

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Shari Redstone, Leslie Moonves

The Les Moonves-led company also said it has postponed its annual meeting of stockholders that had been scheduled for Friday.

CBS Corp.'s board on Thursday voted in favor of a dividend that would reduce the voting power that Viacom and CBS controlling shareholder National Amusements has at the latter, and it suspended its annual shareholder meeting that was scheduled for Friday.

The company said it was "a unanimous vote of the directors not affiliated with National Amusements" and that the plan for dilution is still subject to court approval.

What the directors did, specifically, was declare a dividend of 0.5687 shares of Class A common stock for each share of the company's Class A and Class B stock, which, if enacted, will mean that National Amusements will control about 17 percent voting control over CBS rather than 80 percent.

National Amusements, controlled by Shari Redstone and her ailing father, Sumner, was quick to denounce the move, which CBS had designed in order to prevent a merger with Viacom, which is also controlled by the Redstones.

"As National Amusements has repeatedly stated, it has no intention of forcing a merger that is not supported by both CBS and Viacom," the entity said in an emailed statement. "Today's board vote, while couched as an effort to prevent such a transaction, was pure pretext."

CBS, led by chairman and CEO Leslie Moonves, had on Monday filed a lawsuit in Delaware Chancery Court against its vice chair Shari Redstone, Sumner Redstone and National Amusements. It said then that a committee of independent directors at the company called for the Thursday board meeting to formally vote on issuing a dividend that would dilute National Amusements' voting stake.

"CBS management and the special committee cannot wish away the reality CBS has a controlling shareholder," Thursday's statement from National Amusements reads. "National Amusements yesterday exercised its legal right to amend the company's bylaws to require a supermajority vote on certain board actions with respect to dividends, effective immediately. In light of the board's action today, that action was plainly necessary, and it is valid."

With the expectation that the Redstones would attempt to interfere with Thursday's meeting, CBS, in a preemptive measure, demanded a temporary restraining order from a Delaware judge, which the judge denied on Thursday. 

"The special committee believes that the company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone's potential response to the special committee's unanimous decision ... May 12, 2018, that the proposed Viacom transaction is not in the best interests of CBS stockholders," the CBS motion read.

National Amusements called CBS' move "outrageous" and said it would vigorously defend itself in court. After Thursday's court decision, it said: "We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights."

But clearly the back-and-forth between the rival entities is not through and further legal action is forthcoming. 

CBS made it clear even after losing Thursday's court decision that it would go ahead with a vote, even though it might be interpreted, for now, as symbolic.

"While we are disappointed that the judge did not grant a temporary restraining order, the ruling clearly recognizes that we may bring further legal action to challenge any actions by National Amusements that we consider to be unlawful, and we will do so," CBS said earlier Thursday.

In a statement after the board voted late Thursday, CBS said the dividend it approved, if enacted, "would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives."

Presumably, one of those alternatives could be to allow another company to purchase CBS, as CBS previously insinuated that Shari Redstone may have already scuttled a potential deal that would have had a larger company — possibly Verizon — acquiring CBS.

As for Friday's postponed shareholders meeting, CBS said the board will determine a new date, time and location. "The postponement will provide all constituents with additional time to consider all pertinent matters," the company said.