UPDATED with CBS response. Shari Redstone’s National Amusements fired back at CBS and its CEO, Leslie Moonves, in a new filing this morning in the companies’ legal brawl in Delaware Chancery Court. (Read the complaint HERE.)
“This case is about extraordinary, unjustified and unlawful actions by certain of the Directors” of CBS, the complaint says, “to unilaterally dilute the voting rights of its controlling stockholder, NAI, for all purposes and for all time. It is undisputed that the Director Defendants’ actions are unprecedented under Delaware law.”
In a statement, CBS responded, “Today’s reactive complaint from NAI was not unexpected. The amended complaint filed last week by CBS and its Special Committee details the ways in which NAI misused its power to the detriment of CBS shareholders, and was submitted after careful deliberation by all involved. We continue to believe firmly in our position.”
CBS has accused National Amusements, which controls nearly 80% of it and Viacom, of degrading the value of CBS by trying to force a merger of the two companies, a charge NAI has consistently refuted and did so again repeatedly in its complaint. Merger talks broke down earlier this year over disagreements about the management team and financial terms. Today’s complaint, accompanied by an official statement, took pains to debunk the notion that NAI flouted its fiduciary duties, insisting it was CBS acting recklessly when it scheduled a special board meeting on May 17. The session, ripped by NAI as a “sham meeting,” resulted in a vote signaling the board’s intent to dilute NAI’s control, which is achieved through a dual-class stock ownership structure, to less than 20%.
The new complaint calls that May 17 special meeting “hastily called and perfunctory,” and asks the court to declare the CBS vote invalid and reassert NAI’s status as controlling shareholder. It also seeks “restitution, or other due compensation, for the value of any loss suffered as a result of the dilutive dividend, or any of the other conduct alleged herein.”
In its statement, NAI said the effort to elbow Redstone out of the way struck the company as especially surprising given the tenor of earlier discussions between Moonves and Redstone. “Earlier this year,” the statement said, “Shari Redstone and Les Moonves discussed and agreed that recombining CBS and Viacom would benefit both companies’ shareholders, providing greater scale as needed for success in today’s media and entertainment landscape, and better positioning the companies for a larger transaction in which the combined entity could fetch an attractive premium that neither CBS nor Viacom alone could command. Shari Redstone told Les Moonves that NAI would consider relinquishing its controlling interest in the context of such a transaction.”
Even for companies with as vivid and occasionally contentious a history as CBS and Viacom, the complaint is full of vivid language and detail. Remember, all of these players have already endured a grueling stretch when former chairman Sumner Redstone had battled former protégé Philippe Dauman in court and Redstone also faced intense challenges to his competency. Redstone, who turned 95 on Sunday, has long been out of the day-to-day mix but his bare-knuckled style — the very stance that helped him win Viacom and vault into media moguldom in the first place — appears to be alive and well.
Take this passage in the complaint, for instance: “The only cogent, but manifestly improper, explanation for the Director Defendants’ unprecedented action is that Leslie ‘Les’ Moonves, CBS’s longtime CEO, has tired of having to deal with a stockholder with voting control and has taken particular umbrage that the exercise of such stockholder’s control has migrated from Sumner Redstone to his daughter, Ms. Redstone,” it reads.
“Mr. Moonves has been a successful CEO and has richly benefited under CBS’s dual-class share structure, to the tune of nearly $700 million over his tenure as CEO (making him one of the highest paid CEOs in America, and the highest paid in the media industry). Mr. Moonves apparently gave the Director Defendants an ultimatum: Either you remove NAI’s voting control, or I resign. This ultimatum came against the backdrop of a $180 million ‘golden parachute’ in Mr. Moonves’s employment agreement that had been adopted without discussion or approval of the full Board, with the intended purpose of entrenching Mr. Moonves in his position as CEO.”