Shari Redstone’s National Amusements Inc. made a move Wednesday to help protect its voting rights at CBS as the network seeks to dilute NAI’s majority ownership.
NAI is seeking to amend CBS’ bylaws so that any dividends and amendments of CBS’ bylaws have to be approved by a supermajority (90%) of the CBS Board of Directors and be subject to certain procedural requirements.
The news comes after CBS filed a lawsuit earlier this week against NAI, brought on by the company’s push to get CBS to remerge with Viacom, roughly 12 years after they split. CBS has decided against the merger and proposed a dividend of common stock that would dilute NAI’s stake in CBS from 79% to 17%.
“NAI remains singularly focused on ensuring the long-term success of CBS. NAI believes the irresponsible action taken by CBS and its special committee put in motion a chain of events that poses significant risk to CBS. Due to the magnitude of this threat, NAI was compelled to take this measured step to protect its position while also mitigating further disruption to CBS,” NAI said in a statement.
CBS and NAI met in court on Wednesday and Chancellor Andre Bouchard placed a temporary freeze on the legal proceedings but promised to rule on CBS's request for a temporary restraining order on Thursday. According to Reuters, Bouchard did not care for NAI's move to change bylaws before the hearing.
“I’ve never seen anything like what transpired here in terms of moving parts before TRO hearing and I need to protect my jurisdiction," Bouchard said.
CBS has scheduled a May 17 special board meeting to discuss the dividend.
“The Special Committee believes that the Company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone’s potential response to the Special Committee’s unanimous decision yesterday, May 13, 2018, that the proposed Viacom transaction is not in the best interests of CBS stockholders (other than NAI),” CBS wrote in its lawsuit.
CBS accused Redstone of interfering with the CBS board nomination process, of acting to undermine CBS’s management and of blocking another unnamed acquisition partner from pursuing a deal with CBS.
NAI refuted CBS's claims and the temporary restraining order that CBS requested is due to National Amusements raising concerns about incidents of bullying and intimidation in relation to one CBS director, dating back to 2016.
“National Amusements (NAI) is outraged by the action taken by CBS and strongly refutes its characterization of recent events. NAI had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies. NAI’s conduct throughout supports this, and reflects its commitment to a well-governed process," National Amusements said in a statement. "Ensuring the long-term success of CBS continues to be NAI’s sole interest. This precipitous lawsuit, and the efforts of CBS management and its 'independent' directors to wrest voting control from NAI, are outrageous. We intend to defend our position vigorously and look forward to presenting our arguments in court.”
This article has been updated to include information about the court hearing Wednesday.