CBS is challenging in court the corporate bylaw amendments enacted by majority owner National Amusements to prevent CBS from a stock sale that would dilute NAI’s voting shares.
In a new filing obtained by Deadline, CBS told the Delaware Court of Chancery that NAI’s bylaw amendments were not effective at the time of last week’s special meeting of the CBS board of directors. At that meeting, the CBS board approved a Class A common stock dividend that would dilute National Amusements’ voting interest from approximately 79% to 17%.
According to CBS, NAI’s written content toward the bylaw amendments, which was submitted the day before the special meeting, needs at least 20 days before it can become effective.
“The existing controversy regarding the effectiveness of the Purported Bylaw Amendments is substantial, justiciable, and of sufficient immediacy to warrant the issuance of a declaratory judgment. The judgment will terminate the controversy and remove an uncertainty regarding the enforceability of the Purported Bylaw Amendments,” CBS wrote.
In its court challenge, CBS also accused NAI of breach of fiduciary duty.
CBS called the proposed bylaw changes a “self-interested action that was not in the best interests of CBS and its majority economic stockholders. And threats by Defendants to stack the Board or replace Board members with new directors loyal to them would likewise be an abuse of control that attempts to reap private benefits for themselves at the expense of CBS and its majority economic stockholders.”
CBS called NAI’s actions “disloyal, inequitable, and not entirely fair.”
In all, CBS is requesting the court to declare the stock dividend valid and the dividend bylaw invalid.
The new challenge from CBS comes after last week Chancellor Andre Bouchard ruled against CBS’ motion for a temporary restraining order against Shari Redstone. CBS went ahead with the dividend despite not getting the decision it wanted from the court.
"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. If consummated, the dividend would enable the Company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives," CBS said in a statement.
National Amusements responded shortly after the board's decision.
“As National Amusements has repeatedly stated, it has no intention of forcing a merger that is not supported by both CBS and Viacom. Today’s board vote, while couched as an effort to prevent such a transaction, was pure pretext. 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," National Amusements said in a statement.