CBS & Les Moonves Win Short-Term Halt Of Shari Redstone’s Board Interference

By Dominic Patten, Mark Dent

Les Moonves Shari Redstone

Les Moonves lives to fight Shari Redstone for another day as a Delaware judge just granted a protective order on CBSmotion of May 14 for a temporary restraining order to stop National Amusement from halting a dilution of the holding company’s control of 79.6% of the media corporation’s voting shares – for 24 hours.

The order forces both sides in the pitched battle to temporarily stand down.

Giving the meeting of CBS’ board set for tomorrow some breathing room, a  final ruling from Delaware Court of Chancery Chancellor Andre Bouchard is expected on Thursday before the corporate shindig. “I’m going to take the matter under advisement,” Bouchard told the packed and overflowing court of the almost unheard of temporary TRO just before concluding today’s hearing. “I will say the TRO is effective until I can rule,” he added in court  and then said “I’ve never anything quite like what transpired here in terms of moving a TRO.”

That might be an understatement on a crazed and crammed day for CBS, NAI, Moonves, Redstone and the media world.

Viacom CBS Corp Logo

With an obvious block of Redstone’s long simmering ambition to have CBS and Viacom merge and no resolution in 11th hour talks, the Moonves run company shocking legal move of earlier this week called out its largest single shareholder. Before today’s hearing, CBS turned up the volume even more in asserting that Redstone and NAI  are looking to cause “irreparable harm” with a plan to “replace directors or amend bylaws in advance of Thursday’s board meeting.”

Feeling trapped in “a Hobson’s choice,” Team Redstone exclaimed in a filing of its own this morning that the carving up of the board was never its aim but NAI fully intended to “prevent such dilution and protect its voting power” from CBS’ ‘ambush.” Later this morning, NAI pushed the nuclear button and went ahead and amended CBS bylaws. While a 20-day period is required under federal law for such amendments to fully kick in, the Redstone desired changes would require a supermajority of CBS directors of 90% to approve a special dividend – though that might be a dead letter office over the next day.

Following a morning of those far reaching CBS bylaw changes and a whirlwind of filings beforehand by both sides, the TRO hearing Wednesday afternoon in the Small Wonder state’s Court of Chancery ended just before CBS’ upfront presentation at Carnegie Hall was to kick off at 4 PM ET. With likely weeks or months of litigation to follow even after Chancellor Bouchard issues his final ruling, the hearing  also comes a day before that board meeting by the Moonves run company and CBS’ May 18 annual shareholder meeting.

Surprising no one, today’s arguments in front Chancellor Bouchard revealed the tensions between the former corporate allies. Even before the temporary ruling, CBS lawyerTed Mirvis promised the company would not make any decisions at Thursday’s board meeting  “until the Delaware court decides whether it is legally and equitably permissible.” He then asked, “what is NAI afraid of?”

Fellow House of Moonves lawyer Joseph Allerhand offered a more measured assessment of events that Redstone’s side saw. “The board meeting is not game over,” the attorney noted. “The board meeting is game on. The board is considering whether or not we’d approve a dividend.” Still in noting that the TRO was required because of the possibility that NAI might go ahead and dismiss the CBS board, Allerhand called the state of corporate affairs since the initial motion was filed an “Orwellian world.”
National Amusements attorney Meredith Kotler told the court that the company had not broken fiduciary duty as CBS alleges. The Clearly Gottlieb Steen & Hamilton LLP lawyer pondered that discussions about successions for Moonves did not count as a breach and NAI had not tried to “cram down” a deal with Viacom. In response, Chancellor Bouchard asked Kotler why NAI changed the CBS bylaws to a supermajority status just a minutes before today’s hearing. ” We wanted to stand down,” she said. “Our hands were forced. We didn’t want to take this action.”
It was unclear how much of that Bouchard was buying and how much he thought NAI overreached.
“As mentioned at the conclusion of today’s hearing, this order is being entered in light of the actions taken by NAI today in order to protect the court’s jurisdiction until it can rule on the motion for a temporary restraining order,” paperwork filed by the court after the hearing as over explained further.

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