(Bloomberg) -- A CBS Corp. investor sued a company controlled by billionaire Sumner Redstone for demanding changes to the media company’s bylaws that would harm other shareholders backing a stock issuance.
The changes pushed by National Amusements Inc. President Shari Redstone and her CBS board allies would improperly grant the Redstone family a veto over a stock-dilution plan backed by a majority of the company’s directors, the Pennsylvania-based Westmoreland County Employees’ Retirement System said in a Delaware Chancery Court lawsuit.
The investor suit backs CBS directors’ moves to wrest voting control of the owner of the U.S.’s most-watched prime time network from the Redstones, who own NAI, the company’s controlling shareholder. The stock plan, known as a special dividend, would reduce the family’s control to 17 percent from 79 percent by giving more shares to minority investors.
The bylaw changes, which would require 90 percent of the board to approve the dividend, were designed “solely to further defendants’ interests,” according to Thursday’s suit.
“NAI exercised its legal right to amend CBS’ bylaws,” Sara Evans, an outside spokesman for NAI, said in an emailed statement about the suit. “The efforts of the CBS directors to unilaterally dilute the voting rights of its controlling shareholder are extraordinary, unjustified and unlawful. We are confident the court will uphold NAI’s action.”
The suit is the latest chapter in the CBS control battle, which pits Les Moonves, the company’s chief executive officer, against Shari Redstone, Sumner’s daughter. The issue is whether the media company’s directors have the power to wipe out the Redstones’ voting control and block an unwanted merger with Viacom Inc.
It was Shari Redstone’s effort to merge Viacom and CBS that sparked the fight. She has been advocating a merger for almost two years, a move CBS has resisted unless Moonves was granted autonomy to run the combined companies.
Besides Shari Redstone, the investment fund named CBS directors David Andelman and Robert Klieger as defendants in the case. Both backed the Redstone family’s demands for changes to the company’s bylaw and corporate charter as part of the control fight.
The changes were “invalid” under Delaware law and are an improper attempt to nullify other shareholders’ rights to receive shares under the dividend, the fund’s lawyers said in the suit.
The fund wants a judge to approve the special dividend and find Shari Redstone and her allies breached legal duties to other CBS shareholders by demanding the flawed bylaw changes.
The case is Westmoreland County Employees’ Retirement System v. National Amusements Inc., No. 2018-0392, Delaware Chancery Court (Wilmington).
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