Despite her claims to the contrary, Shari Redstone does intend to make sudden changes to the CBS board, the media company said today in the latest filing in its motion for a temporary restraining order that could halt an eventual merger with Viacom.
“Defendants’ opposition proves Plaintiffs need a TRO: Unless restrained, Defendants will use the consent process to replace directors or amend bylaws in advance of Thursday’s board meeting,” CBS said Wednesday in a reply (read it here) to Redstone and National Amusements’ opposition to CBS’ May 14 motion for such an order. The move would reduce the holding company’s control of the media corporation.
“Plaintiffs are not seeing ghosts,” attorneys for CBS also assert. “Defendants’ opposition brief, the positions communicated to Plaintiffs’ counsel during the parties’ ‘standstill’ discussions, and public statements attributed to sources ‘close to’ Ms. Redstone confirm the Special Committee’s fears,” they add, with the kicker of “any machinations to prevent the Board’s consideration of their proposed solution is without question a threat of imminent and irreparable harm.”
Which means that as CBS executives detail the network’s plans for next season this morning during an upfront presentation in New York, the real drama is taking place in Delaware’s Court of Chancery, which will hear arguments over the TRO this afternoon. More exciting in many ways than the net’s new lineup, filings are flying fast in a showdown that could see the Redstones’ massive voting shares in CBS greatly reduced, or even CBS CEO Les Moonves enacting a $150 million golden parachute to exit the broadcast and cable giant he helped build.
And that doesn’t have to happen, CBS insists, implying that Redstone and NAI should just chill out at bit.
“Merely enabling the Board to consider whether it believes the status quo should change—and only if the Delaware courts determine that the dividend is permissible—does not itself actually change the status quo,” claims today’s reply, throwing cold water on the corporate fire it helped start.
“Defendants cast the matter as a ‘Hobson’s choice’— accept dilution or act to prevent such dilution by removing directors,” the 14-page reply adds, using a quote from the opposition filing earlier this morning. “But Defendants face no such choice. Plaintiffs have made clear that any action taken by the Board at the Special Meeting will not take effect until this Court rules on its legality.”
With the TRO-empowered board potentially voting Thursday to strip down the Redstones’ 80% control of the voting shares in CBS Corp, the defendants see things differently.
“The Board unquestionably understands that a controlling stockholder would not willingly give up control uncompensated, and it is imprudent that the Board would put the management of a $20 billion company at risk in such a fashion,” Redstone’s NYC-based Clearly Gottlieb Steen & Hamilton LLP and local Delaware lawyers made clear this morning in their own filing.
Having kicked off this legal sequence of events with their shocking breach of fiduciary duty complaint filed Monday, CBS pulled back the veil o show that in fact efforts to avert a stand-off had been in the making in the corner offices over the past few days to no avail. “Plaintiffs attempted but were unable to reach an agreement with Defendants that would eliminate the need for the Court to hear the TRO motion,” CBS reveled in its reply.
“Defendants first demanded the parties agree not to hold the Board meeting,” CBS stated. “But an outcome that prevents the Board from convening to discuss the dividend is untenable,” the Moonves run group added. “Defendants ultimately offered to let the meeting occur, but only if the controller had the right to exercise written consent rights to be effective before the meeting, so as to claim that the whole thing was for naught. Plaintiffs rejected this attempt to game the standstill process.”
Standstill or not, this is now a process moving furiously toward this afternoon’s likely decisive hearing. Depending on the outcome, today’s upfronts, Thursday’s board meeting and Friday’s annual CBS shareholders meeting could follow a very different agenda.