A filing today with the Securities and Exchange Commission signals the company’s plan to challenge the validity of the bylaw change. It’ll argue that SEC regulations mandate giving stockholders 20 days notice before such a corporate action could be taken.
National Amusements disagrees, arguing that the bylaw change takes immediate effect.
The timing is critical. National Amusements, which controls a nearly 80% of CBS’s voting stock, changed the network’s corporate bylaws last Wednesday to require a supermajority of directors to support a dividend payment. This modification came ahead of the board’s 11-3 vote Thursday to grant 0.57 share of Class A voting stock to every shareholder, including those who currently hold non-voting shares.
The board’s action, if upheld by the courts, would lessen Redstone’s control over the company by reducing her voting interest from 80% to 20%. A judge in Delaware ultimately will decide the matter. Expect CBS to file an amended complaint this week.
The long-simmering tensions between CBS and Redstone reached a boiling point early last week, when CBS initially sought a temporary restraining order. The aim was to prevent Redstone and National Amusements from taking any actions that would interfere with its efforts to operate as an independent company. Thus far this week, the waters have calmed somewhat, at least on the surface. Shares in CBS and Viacom have both dipped a fraction on lighter-than-average trading volume.
The independent directors of CBS have raised concerns that Redstone would take actions — including even ousting CEO Leslie Moonves, or replacing board members — to force a merger with corporate sibling Viacom.
National Amusements has repeatedly said that it would not compel any combination that lacked the support of both companies, though it clearly would not stand for any moves by CBS to diminish its control over the network.