(Bloomberg) -- CBS Corp. got a 24-hour reprieve from a judge in its attempt to stave off the demands of its top shareholder, leaving the fate of the media company hanging in the balance until Thursday.
CBS won a ruling Wednesday temporarily blocking Shari Redstone from interfering with its board’s preparation of a defensive measure to ward off a merger with Viacom Inc. After a hearing, Delaware Chancery Court Judge Andre Bouchard said he’d make a definitive ruling on Thursday before CBS’s board meeting, and told both sides to stand down until then.
In the meantime, Redstone, a CBS director and president of the family’s movie-theater company National Amusements Inc., can’t make any moves opposing the company’s proposal to wipe out the Redstones’ voting control, Bouchard said.
CBS wants to allow its board to move ahead Thursday with a proposal to dilute the Redstones’ control of the broadcaster. That would allow CBS to fight off the Redstones’ demands that the media company rejoin with Viacom, owner of a television network, MTV, Comedy Central and Paramount Studios. It could also allow CBS Chief Executive Officer Leslie Moonves to wrest control from the Redstones, who have a controlling interest through NAI.
CBS directors need the judge to block Shari Redstone from removing them to thwart the dilution plan, said Joseph Allerhand, a lawyer for CBS.
The order is “needed more than ever,” Allerhand said. “They are going to remove directors.’’
Meredith Kotler, the Redstone family’s lawyer, scoffed at the idea that CBS directors were in Shari Redstone’s crosshairs. “There’s no evidence” we intended to remove board members, she told Bouchard.
She said Moonves’s move to seek to strip the Redstones of voting control was unprecedented and the family ordered the last-minute changes to CBS’s bylaws and charter after the media company refused to back away from a legal confrontation.
“When they refused to agree to a mutual stand down, we had no choice, our hand was forced,” Kotler said.
The CBS board is scheduled to meet at 5 p.m. EDT Thursday.
Even if the CBS board gets the chance to approve the dilution plan, it won’t go into effect until directors are sure its “legal permissible,” said Theodore Mirvis, a lawyer for the media company. Bouchard may be asked to decide that issue later.
It’s an unusual corporate fracas over two media properties that are controlled by the same company -- NAI -- and were even part of a single conglomerate until 2005. After more than a year of opposing National Amusements’ demands to pair up the businesses, Moonves and some CBS directors dared to take on the Redstone family.
Shari Redstone, who took over as NAI’s overseer after health issues sidelined her billionaire father, opposed the split of the two companies. She’s seeking to weld them back together on her terms, with Viacom CEO Bob Bakish as the re-combined company’s second-in-command. Moonves prefers to keep his own people in charge.
“I was never a great proponent of the split of the two companies,” Shari Redstone said at a 2016 conference, according to Vanity Fair magazine. “The path each company took could have been different under different leadership and this is why a combination should be explored now.” Shari Redstone also sits on Viacom’s board.
Viacom’s value has plummeted in recent years due to the shrinking viewership of its cable networks. All TV companies are struggling from the migration of viewers to online services Netflix and YouTube. Viacom has suffered more than most given its reliance on young viewers and its stumbles developing hit shows.
CBS shares fell 0.7 percent to $53.43 on Thursday, while Viacom gained 0.5 percent to $28.42.
Meanwhile, Moonves made an appearance on stage at a presentation for advertisers in New York on Wednesday. He received a standing ovation from a segment of the crowd and boasted about CBS’s affinity for winning. The network has been the most-watched in the U.S. for 10 years in a row.
“How’s your week been?” he said.
The case is CBS Corp. v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).
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