Shari Redstone, who controls National Amusements, issued the change last Wednesday requiring a 90% vote of the board to approve a dividend. Redstone issued the change in order to thwart the board’s plan to dilute her voting power from 80% to 17%, thus stripping her of control of the company. The CBS board went ahead on Thursday with a vote to dilute Redstone’s shares, which was supported on a vote of 11-3.
CBS and Redstone are now in a face-off over whether the dilution can take effect. In the SEC filing Tuesday, CBS previewed the arguments it will make before Delaware Chancery Court. The board argues that stockholders were not given 20 days’ notice of the bylaw amendment, rendering it invalid.
“The Company believes the Purported Bylaw Amendments are invalid under Delaware law and the Purported Bylaw Amendments cannot become effective under controlling federal law and SEC rules until 20 days after the Information Statement is distributed to stockholders even if they were valid,” the company said in the filing.
If accepted by the court, the bylaw changes would permit Redstone to maintain control of the company.
“NAI exercised its legal right to amend CBS’ bylaws and this change was effective immediately,” the parent company said in a statement. “We are confident the court will uphold NAI’s action.”
The CBS board has been in rebellion since last week, when a special committee rejected Redstone’s proposal to merge CBS with Viacom, which she also controls.