CBS Halts Tomorrow’s Annual Shareholder Meeting Following Board Vote Showdown

By Dawn C. Chmielewski, Dominic Patten, Dade Hayes

Shari Redstone Leslie Moonves

After a week of dramatic legal skirmishes with Shari Redstone and National Amusements in its battle to stop a proposed merger with Viacom, CBS today decided to hit the pause button on Friday’s long scheduled annual shareholder’s meeting.

“In light of the recent actions by NAI and the pending litigation in the Delaware Chancery Court, the Board of Directors determined to postpone its 2018 annual meeting of stockholders that was previously scheduled to take place tomorrow,” the Les Moonves-run company said at the conclusion of today’s board meeting in New York City. “The Board will determine shortly a new record date for the meeting and will publicly announce the new date, time and location. The postponement will provide all constituents with additional time to consider all pertinent matters before the annual meeting.”

After the high-stakes court tactics, CBS directors also held a symbolic vote seeking to diminish the influence of the network’s controlling shareholder — Redstone’s holding company National Amusements. As Deadline reported earlier, Shari Redstone was in attendance for what was likely a tense gathering.

The board voted 11-3 to approve a special dividend that would grant 0.57 share of Class A voting stock to every shareholder, including those who currently hold non-voting shares. It’s a move intended to dilute Shari Redstone’s control over the network through the family’s National Amusements, reducing its voting interest from 80% to 20% .

Still, the stock-swap vote is unlikely to take effect, at least in the immediate future for the battling companies.

Viacom CBS Corp Logo

Ahead of a court hearing Wednesday on an ultimately unsuccessful CBS motion for a temporary restraining order, National Amusements changed the bylaws of the Les Moonves-run company to require the support of a supermajority of directors for such measures. “The Company believes that the written consents delivered by NAI purporting to amend the Company’s bylaws are neither valid nor effective,” asserted CBS, insisting the change doesn’t kick in for another 19 days.

NAI disagrees.

“As National Amusements has repeatedly stated, it has no intention of forcing a merger that is not supported by both CBS and Viacom,” the holding company told Deadline. “Today’s board vote, while couched as an effort to prevent such a transaction, was pure pretext,” they bluntly said. “CBS management and the special committee cannot wish away the reality that CBS has a controlling shareholder. NAI yesterday exercised its legal right to amend the company’s bylaws to require a supermajority vote on certain board actions with respect to dividends, effective immediately. In light of the Board’s action today, that action was plainly necessary, and it is valid.”

CBS said the payment of the dividend will be determined by the Delaware courts, and the outcome of any legal appeals.

“The Board of Directors has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders’ interests and would unlock significant stockholder value,” the House of Moonves said additionally of today’s vote.” “If consummated, the dividend would enable the Company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.”

Leaving the meeting today, ex-Bank of America boss and CBS board member Charles Gifford pumped his fist and said “we’ll see” in response to a question by Deadline whether the board was ready for a fight. Gifford is the board member NAI sought to see tossed based on claims of his personal behavior.

With tensions already in the air, directors kept a low profile Thursday as they arrived at CBS HQ for the meeting. Two were spotted walking the short distance from their chauffeur-driven SUVs to the building, with security guards by their sides. They ignored the presence on the sidewalk of a CNBC crew and a reporter from Deadline.

A security guard, who the night before had worked CBS’ upfront after party at The Plaza Hotel, moved reporters a safe distance away from the entrance and onto a public sidewalk.

The meeting culminated a week of legal drama, in which CBS made an extraordinary attempt to obtain a TRO to prevent Redstone from interfering with the vote. The network said it was fearful of her meddling in CBS’ deliberations over a possible merger with corporate sibling Viacom, a charge that Redstone, through National Amusements, has emphatically denied.

Bernstein analyst Todd Juenger observed that CBS’ legal battle may have given the network what it wanted after all: a public assurance from National Amusements that it has no intention of forcing a merger, whether by removing and replacing board members or through other means.

“It would be impossible, we think, for NAI to no go and do exactly what they told the court they wouldn’t do, especially given the intense level of scrutiny that NAI will now be under,” he said.

The events would have provide an unusually charged backdrop for the annual shareholders meeting, which was supposed to take place at 10 AM ET Friday the Museum of Modern Art in New York. The meeting typically presents an opportunity for CBS’ showman chief executive Moonves to take a victory lap, touting CBS’ programming and ratings accomplishments and financial performance.

It’s anybody’s guess what might happen this year.

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