CBS Controlling Shareholder Tightens Control Amid Feud

CBS board weakens Redstone’s hold as feud intensifies

CBS Corp. and top shareholder Shari Redstone are headed for a faceoff Thursday afternoon when the board meets to decide whether to dilute her voting rights, just hours after a court ruled that she has the right to intervene to protect them. However, the move was subject to court approval, and Redstone is expected to challenge the validity of the board action in the coming days.

As for Friday's postponed shareholders meeting, CBS said the board will determine a new date, time and location.

CBS Corporation operates as a mass media firm worldwide. "In light of the board's action today, that action was plainly necessary, and it is valid".

The CBS board sought to prevent Redstone, whose company National Amusements owns controlling shares of CBS and Viacom, from forcing out members before Thursday night's vote on issuing a stock dividend.

A DE judge rejected a petition from the CBS board of directors to block the Redstone family holding company from interfering with its evaluation of any merger deal.

National Amusements and attorneys for Redstone have denied any intention to replace CBS directors. Since National Amusements holds three seats on the board and there are only 14 directors, a 90% majority vote would be highly unlikely.

CBS and Viacom were once part of the same company, known as Viacom, but were split in 2005 into separate entities, both controlled by Sumner Redstone.

CBS asked the judge to issue a restraining order to stop any interference with the composition of the board or modifying any bylaws affecting voting power.

"The judge today found that the allegations in our lawsuit 'are sufficient to state a colorable claim for breach of fiduciary duty against Ms. Redstone and NAI as CBS's controlling stockholder, '" CBS said. Shortly before Wednesday's hearing, she changed the CBS bylaws to require a supermajority vote on matters like this.

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CBS said it was disappointed but said it would continue its fight.

The ruling sent shares of CBS shares down as much as 7.2 percent to $49.95, the biggest intraday decline in nearly three years. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

According to court documents, the special committee had determined on Sunday night that the deal was not in the best interest of CBS or its shareholders.

CBS contends Shari Redstone threatened to similarly oust directors who backed the dividend plan and pushed to have her father's lawyer, Robert Klieger, take his CBS seat.

The Redstone holding company controls about 10 percent of the equity of CBS but has almost 80 percent of the voting power through a special share class.

However, CBS said Redstone relaunched her efforts in January, causing Viacom's stock to soar while CBS's stock plummeted 28 percent from its 52-week high in April, representing a $7 billion loss in market capitalization for CBS's public investors.

"Ultimately, we believe it is hard to imagine Moonves having a role in the combined company", BTIG Research analyst Richard Greenfield said in a note to clients this week.

Although Delaware court Chancellor Andre Bouchard said in the ruling there was no legal precedent for granting CBS's request for a restraining order, he said the company could challenge National Amusements in court if it takes actions that could harm shareholders.

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