UPDATE 1:15 PM 5/17/18: A Delaware judge has denied CBS’ request for a temporary restraining order to bar controlling shareholder Shari Redstone from blocking a planned vote today by the CBS board of directors on a move that would dilute Redstone’s voting power in the company.
According to Variety, Delaware Chancery Court Chancellor Andre Bouchard issued his ruling Thursday just before noon. CBS vowed to proceed with its plan to hold the board vote at 5 p.m. ET today. CBS shares plunged more than 6% after the judge’s ruling hit. CBS is also scheduled to hold its regularly scheduled annual shareholders meeting on Friday — which will surely be an awkward affair given the corporate infighting.
“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,” a spokeswoman for National Amusements said.
“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.”
A Delaware Chancery Court judge put a brief pause Wednesday on the legal battle between CBS and Shari Redstone. Following a hearing, Chancellor Andre Bouchard promised to issue a ruling before a special meeting of the CBS board, which is set to be held on Thursday afternoon. He also granted a restraining order that will temporarily freeze the case in place until then.
According to Variety, news of the judge’s limited decision landed just minutes before CBS held its annual upfront presentation for advertisers at Carnegie Hall. The bulk of CBS’ executive team was gathered at Carnegie Hall and were energized by the decision. Moonves got a standing ovation as he came out for his opening remarks.
The legal war erupted on Monday when CBS Corp. filed a lawsuit against National Amusements, Inc. (NAI) accusing it and Shari Redstone of breaching its fiduciary duty to CBS shareholders by pushing for the merger of CBS Corp. and Viacom, the media conglom that NAI also controls. CBS has been cool to the merger on strategic grounds, given Viacom’s weaknesses.
The sides are squaring off over CBS Corp.’s request for a temporary restraining order barring NAI from replacing CBS board members, or making changes to the company’s charter and bylaws before a judge can weigh in on the merits of CBS’ suit. As part of the legal maneuver, CBS has proposed that board members vote on a plan to issue a special stock dividend that would have the effect of diluting NAI’s voting shares from 79.5% to about 17%.
The unusual case could have profound consequences, according to The NYPost.
If CBS prevails and dilutes Redstone’s interest, the removal of controlling interest could put the company in play.
If Redstone manages to block CBS’ planned move, her already-challenged relationship with CBS management would likely become irreparable.