Redstone Seeks to Change CBS Bylaws After `Brazen' Moonves Move
(Bloomberg) -- A company owned by billionaire Sumner Redstone and his family says CBS Corp. directors filed a flawed lawsuit seeking to block a merger with Viacom Inc. in a “brazen attempt’ to deny the Redstones’ rights as shareholders.
Lawyers for National Amusements Inc., which owns a controlling interest in CBS and Viacom, argue that CBS was misinformed and there’s no effort underway to remove directors, as alleged in the suit. The Redstone family is upset with a CBS board proposal that would wipe out their voting control over the network.
NAI also said it delivered written consents to CBS to amend the broadcaster’s bylaws, effective immediately. The company said the move would “safeguard against unlawful action by CBS and its special committee in derogation of their fiduciary obligations to shareholders.”
CBS Chief Executive Officer Leslie Moonves’s attempt “to disenfranchise a controlling stockholder of its voting rights fails on many levels,” lawyers for Shari Redstone, NAI’s president and one of the network’s directors, said in a response filed in court in Delaware to CBS’s suit.
A judge in Delaware will hear arguments later Wednesday on whether to block Shari Redstone from interfering with the CBS board’s consideration Thursday of a proposal to lessen the Redstone family’s control of the broadcaster. That would allow Moonves to fight off the Redstones’ demands that the network rejoin with Viacom, owner MTV, Comedy Central and Paramount Studios. The judge could either rule on CBS’s request or order the board meeting to be postponed until he makes a decision.
A ruling may shed light on the viability of Moonves’ strategy of seeking to wrest control of the media company from the Redstone family and open it up to other bids. CBS officials accuse Shari Redstone of discouraging Verizon Communications Inc. from considering an offer for the network, according to two people familiar with the situation. They spoke on the basis of anonymity because they weren’t authorized to speak publicly about the matter.
Verizon CEO Lowell McAdam said he wasn’t interested in assets like CBS and Fox during an appearance on CNBC Tuesday. Verizon’s Chief Financial Officer Matt Ellis repeated that position during an investor presentation in Boston Wednesday.
In the filing, NAI’s lawyers dismissed CBS’s claims that Shari Redstone was preparing to oust CBS directors, as her father had done with Viacom directors who questioned his mental capacities in 2016. “NAI never intended to remove directors or force a merger over CBS’s objections,” according to the filing.
In a response to NAI’s filing, CBS reiterated the threat of “irreparable harm” from Shari Redstone’s actions and urged the court to allow CBS directors to act in the best interests of shareholders.
“Directors are not potted plants,” the company said. “They have a right and duty to act.”
A special committee of Viacom’s board has rejected NAI’s merger proposals, and directors filed suit as a defensive measure to stop Shari Redstone from forcing a Viacom merger on the network under her terms.
CBS’s board is slated to consider a proposal to use a special dividend to chop the Redstones’ voting control of the media company to 17 percent from 79 percent at a May 17 meeting. “The proposed dividend would violate CBS’s Charter,” the family’s lawyers said in the filing.
CBS officials maintain Shari Redstone threatened to oust directors who backed the plan to reduce the family’s voting power and pushed to have her father’s lawyer, Robert Klieger, named to the billionaire’s CBS board seat. Sumner Redstone now holds a non-voting spot on the network’s board.
Klieger has been “instructing management and other directors on Ms. Redstone’s/NAI’s wishes -- including the desire to replace certain directors,” according to CBS’s court filings.
NAI officials also assert that board committees from both firms already have reached a provisional agreement on the proposed merger’s economic terms. They also insist CBS’s suit was prompted by Shari Redstone’s complaints about being the target of bullying and intimidation from one of her colleagues on the network’s board. The director has been identified in court papers as Chad Gifford, Bank of America Corp.’s former chairman.
CBS officials rebuffed Shari Redstone’s bullying allegations against Gifford Wednesday as “vague and unsubstantiated,” saying in an email that NAI and the billionaire’s daughter twice supported the former banker’s election to the network’s board.
Gifford didn’t immediately respond to a call for comment.
The case is CBS Corp. v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).
©2018 Bloomberg L.P.