NEW YORK – Tuesday morning, Variety reported that Shari Redstone’s National Amusements Inc. (NAI) filed a suit in a Delaware Chancery Court against CBS CEO Les Moonves and most members of the CBS board of directors in the latest twist in the ongoing battle for control of the company and its proposed re-merger with Viacom.
NAI’s complaint – 66 pages long – looks to block the board’s recent effort to dilute NAI’s voting control in the company. It also challenges Moonves’ severance package, saying that the deal was never reviewed by the full board and is, therefore, not legally enforceable. The suit comes in response to CBS’ May 14 filing that put Redstone and NAI in the crosshairs, claiming that NAI’s goal of merging CBS and Viacom was not in the best interests of other CBS shareholders.
Last week, Moonves had said he doesn’t want CBS to be weighed down by Viacom channels including MTV and Comedy Central, according to a story in the Hollywood Reporter. Moonves said the networks are an “albatross” and worries that CBS might have to bundle them into future carriage deals with operators.
Before that reason to block a re-merger with Viacom, CBS had pointed toward stock fluctuations each time a Viacom re-merger has been proposed, both this year and in 2016. CBS has ultimately decided that recombining with Viacom is not in the best interest of its shareholders.
CBS reportedly is interested in bringing on more content for its over-the-top (OTT) services – CBS All Access and Showtime – but could go after cheaper options than Viacom.
During negotiations in April, CBS proposed a deal valuing Viacom at $11.9 billion. Viacom’s counter raised the valuation to $14.7 billion.
Another of Moonves' reported issues, not a new one, is Viacom CEO Bob Bakish’s potential role if the two companies did merge. NAI’s Shari Redstone initially wanted Bakish to be an executive but later acquiesced with just a seat on the board of the combined company.
Moonves reportedly likes neither option.
Moonves, who had been friendly with Redstone, sued NAI on May 14 to block the Viacom merger. The Hollywood Reporter story says that in private, Moonves points out that even Shari’s father, now 94 years old, said in a letter made public a decade ago that he gifted to his daughter her interest in NAI – and therefore in CBS and Viacom – but that he “built these great media companies” with “little or no contribution” from his children, including Shari.
The core component of the battle between CBS and NAI is NAI’s recently issued CBS bylaw changes that require 90-percent board approval to pass measures like the CBS-proposed dividend, which would dilute NAI’s voting shares from 80 percent to about 20 percent.
Since Redstone and two other CBS board members – Robert Klieger and David Andelman – are affiliated with NAI, a supermajority of the total 14 board members would be difficult to reach.
The Hollywood Reporter says if the Redstones really want to fire Moonves, they’d have to replace much of the CBS board, risking accusations they were not acting in the best interest of stockholders in doing so. And, as it stands, Moonves would depart with that disputed golden parachute – likely worth more than $180 million.