National Amusements issued a statement saying it is “outraged” by CBS’s lawsuit and the allegations of heavy-handed tactics by Shari Redstone — including the threat of reconstituting the network’s board of directors to force a merger with corporate sibling Viacom.
The family-owned company, which controls nearly 80% of CBS’s voting stock, said it has “no intention of replacing the CBS board or forcing a deal that was not supported by both companies.”
The suit (read it here) in Delaware Court of Chancery alleges breaches of fiduciary duty by National Amusements, the controlling shareholder of both CBS and Viacom. Redstone, who runs National Amusements, has been locked in a struggle with CBS chairman and CEO Leslie Moonves over the company’s merger talks with Viacom. The flare-up comes on an already momentous week for CBS, which is holding its annual upfront presentation to advertisers on Wednesday and convening its annual shareholder meeting Friday.
CBS went to court to prevent National Amusements from “abusing” its voting control over the network or hampering the work of its independent directors in evaluating a potential combination with Viacom.
The suit details alleged meddling on the part of Redstone, including installing the family lawyer, Robert Klieger, on the CBS board to advance her “directives,” acting to “undermine” the CBS management team by speaking to potential replacements for Moonves without board approval and expressing a willingness to replace CBS directors to compel the merger.
In arguing the case for an injunction, the network cites events that preceded Philippe Dauman’s 2016 ouster as chief executive of Viacom, including National Amusements’ move to replace Dauman and four other members of the Viacom board.
“The Special Committee believes Ms. Redstone will follow through on the threats expressed in the media –much like she did in her controversial takeover of the Viacom board in 2016, and will seek to replace CBS’s independent board members and make other changes to CBS’s organizational documents to impede the CBS board,” the suit claims.
National Amusements said that CBS has acknowledged the strategic merits of a potential combination with Viacom and claims the special committees established to evaluate a potential merger have reached a tentative agreement on economic terms.
“Ensuring the long-term success of CBS continues to be NAI’s sole interest. This precipitous lawsuit, and the efforts of CBS management and its ‘independent’ directors to wrest voting control from NAI, are outrageous,” National Amusements said in a statement. “We intend to defend our position vigorously and look forward to presenting our arguments in court.”
National Amusements said it believes CBS’s actions, seeking an injunction to bar Redstone from interfering with a meeting Thursday of its board of directors, stems from an incident involving an unnamed CBS director dating from 2016. The holding company said it has made “every effort to deal with this matter privately and confidentially. Unfortunately, CBS’s action today continues to enable and empower such conduct.”
Neither National Amusements nor CBS would identify the director.
The CBS board called the special meeting, on the eve of Friday’s annual shareholder meeting in New York’s Museum of Modern Art, to consider a move that would diminish Redstone’s control over the company.
The network’s board is evaluating distributing pro-rated shares of Class A voting stock to holders of non-voting Class B shares. The would reduce National Amusements’ voting power to 17%, from its current controlling level of 80%.
“The contemplated dividend would dilute National Amusements’ voting control so that Ms. Redstone is no longer able to block the CBS board from considering appropriate corporate strategies in the interest of all stockholders,” CBS said in its suit.
Here’s the full statement:
“National Amusements (NAI) is outraged by the action taken by CBS and strongly refutes its characterization of recent events. NAI had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies. NAI’s conduct throughout supports this, and reflects its commitment to a well-governed process.
CBS itself expressed support for the strategic merits of a combination with Viacom, and it is our understanding that both Special Committees had reached a provisional agreement on economic terms. NAI believes CBS’s action today was precipitated following NAI raising specific concerns about incidents of bullying and intimidation in relation to one CBS director, dating back to 2016. NAI has made every effort to deal with this matter privately and confidentially. Unfortunately, CBS’s action today continues to enable and empower such conduct.
Ensuring the long-term success of CBS continues to be NAI’s sole interest. This precipitous lawsuit, and the efforts of CBS management and its “independent” directors to wrest voting control from NAI, are outrageous. We intend to defend our position vigorously and look forward to presenting our arguments in court.”