Shari Redstone’s National Amusements has sought to block CBS Corp.’s attempt to dilute her voting power in the company by implementing changes in the company’s charter to require 90% of board members to agree on the scheduling of certain board meetings.
That step is important because CBS had planned to hold a special board meeting on Thursday for directors to vote on issuing a stock dividend that would have the effect of diluting Redstone’s voting shares in the company from 76.4% to about 17%. National Amusements Inc. (NAI) can make the change to CBS’ bylaws without board approval because of its overwhelming voting power.
NAI’s move on Wednesday mourning is the latest joust in an extraordinary public battle between CBS and its controlling shareholder that erupted into plain view on Monday when CBS filed a lawsuit against NAI accusing Shari Redstone of breaching her fiduciary duty to all CBS shareholders by pushing for a merger of CBS and Viacom, the media conglom also controlled by NAI.
The change requires the supermajority vote of 90% of CBS board members to schedule any meetings to discuss stock dividends or changes to the company’s bylaws, and a supermajority vote to issue any dividends or bylaw amendments. The CBS board would not likely be able to muster 90% of the 14-member panel to approve Thursday’s meeting because Redstone holds a board seat as does Robert Klieger, who has worked as a personal lawyer to Redstone and her father, the 94-year-old mogul Sumner Redstone.
CBS and NAI are alredy set to square off in court in Delaware today as they battle over the future of CBS, Viacom and Redstone’s control of CBS through the National Amusements holding company.
National Amusements sees the change to the charter implemented Wednesday as a moderate step to block CBS’ board from holding the Thursday meeting. CBS filed a lawsuit against NAI on Monday, accusing the company of breaching its fiduciary duty by seeking to force the merger of CBS Corp. and Viacom, which NAI also controls. Redstone is vice chair of CBS and Viacom and president of National Amusements. In the past few weeks once-friendly relations between Redstone and CBS chairman-CEO Leslie Moonves have devolved into open warfare in the media and, as of Monday, in court.
“NAI remains singularly focused on ensuring the long-term success of CBS. NAI believes the irresponsible action taken by CBS and its special committee put in motion a chain of events that poses significant risk to CBS,” NAI said in a statement. “Due to the magnitude of this threat, NAI was compelled to take this measured step to protect its position while also mitigating further disruption to CBS.”
In the lawsuit filed Monday against NAI, CBS Corp. has accused Redstone of plotting to replace members of CBS’ board of directors in order to advance the merger agenda against the unanimous recommendation of the CBS board committee that has been evaluating a possible Viacom deal. CBS took the extraordinary step of proposing the stock dividend that would dilute NAI’s voting power in an effort to block Redstone from replacing board members who are against a deal with Viacom.
National Amusements counter-punch on Wednesday stopped short of replacing any board members, as the company has declared in court filings this week that it had no intention of doing so. NAI asserts that CBS’ fears of a board shakeup by Redstone were driven by “conjecture” and “unsourced media reports.”
CBS maintains it had to take dramatic steps against NAI to protect the interests of CBS’ other shareholders. NAI holds about 10.3% of the economic interest in the company, but its preferred shares give it outsized control over voting power.
“The latest step by NAI provides further evidence of why we concluded that we had no choice but to file our action in the Delaware courts, in order to protect the interests of all CBS shareholders,” CBS said in response to NAI’s bylaw change. “We continue to be confident in our position and look forward to presenting our case in court.”
CBS has already vowed in its court filings to hold off on the actual issuance of the stock, if approved by board members, until a Delaware judge has weighed in on the merits of its lawsuit against NAI. In that context, the effort to hold a special board meeting on Thursday was more of a warning shot to NAI and Redstone rather than a hope of quickly curbing Redstone’s power.