May 17, 2018

CBS board votes to dilute power of majority owner, stakeholder

A large sign and logo greets visitors to CBS's Television Studios. Photo: George Rose/Getty Images

CBS’ board has voted to dilute the voting power of its majority owner, National Amusements Inc. (NAI), and it’s majority stakeholder, Shari Redstone, by over 60%, limiting her ability to replace the company's board.

Why it matters: The move is mostly symbolic, because nothing can actually go into effect until a Delaware judge reviews the merits of CBS’ lawsuit against NAI, which attempts to remove Redstone’s control and dilute her shares.

The court dealt a blow to CBS Thursday by voting in favor of Redstone, not granting CBS a restraining order against her.

The issue: Whether CBS will merge with Viacom, a cable company also majority owners by NAI and formerly combined with CBS.

  • Sources tell Axios CBS would rather merge with a company that’s better positioned in the market to distribute digital content, like a tech or telecom company, than a cable company whose many channels would make it harder to negotiate with cable companies for retransmission fees.
  • In court documents revealed Monday, CBS said Redstone told a company (sources say is likely Verizon) that CBS is not for sale.

The bigger picture: It’s the latest step in a week-long feud between CBS and is parent company of over 20 years for independence so that it can avoid a merger with Viacom, which is owned by the same parent company.

What they're saying: In a statement, NAI says “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.” 

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