CBS’ move to get a temporary restraining order placed on Shari Redstone’s National Amusements, which controls 80% of the voting shares in CBS, has been denied.
Chancellor Andre Bouchard ruled against CBS’ motion, which the company filed Monday as it considers a Class A common stock dividend that would dilute National Amusements’ voting shares from about 80% to 17%.
Although National Amusements is the controlling shareholder in CBS and has three board members, it only owns a 10.3% economic stake in CBS.
“We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights. The court’s ruling today represents a vindication of National Amusements’ right to protect its interests. As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors,” National Amusements said in a statement.
The court’s decision comes after Bouchard briefly paused the legal proceedings on Wednesday following National Amusements’ move to change CBS board bylaws and require a 90% super majority to approve any dividend. Since National Amusements holds three seats on the board and there are only 14 directors, a 90% majority vote would be highly unlikely.
CBS on Thursday still declared a pro rata dividend of 0.5687 shares of Class A common stock for each share of the Company's Class A common stock and Class B common stock. The company said payment of the dividend is conditioned on a final determination by the Delaware courts, including any 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. 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.
The current dustup between CBS and National Amusements arose after Shari Redstone earlier this year (and for the second time in two years) urged CBS and Viacom, which National Amusements also controls, to merge. CBS decided earlier this week that a recombination with Viacom, from which is officially split in 2005, would not be in the best interest of its shareholders.
This article was updated with information about CBS' dividend announcement.