CBS loses initial battle with shareholder

CBS loses initial battle with shareholder
Shari Redstone, a trustee and a vice chairman of Viacom and CBS, attends the annual Allen & Company Sun Valley Conference, July 5, 2016 in Sun Valley, Idaho.Image copyright Getty Images
Image caption Shari Redstone wants to merge CBS with Viacom, another National Amusements company

US media company CBS has lost an initial court battle amid a dispute with one of its biggest shareholders over control of the firm.

A Delaware judge on Thursday lifted a temporary restraining order against the investor, National Amusements, which is owned by the Redstone family and has been pushing CBS to merge with Viacom.

The ruling is expected to prevent CBS from taking steps to reduce National Amusements’ voting power.

CBS said it would continue to fight.

It said: “The ruling clearly recognises that we may bring further legal action to challenge any actions by [National Amusements] that we consider to be unlawful, and we will do so.”

And following the court’s decision on Thursday, CBS went ahead with a board meeting at which it backed plans to reduce National Amusements’ voting power.

The board voted to approve a special dividend that would cut the Redstone family’s stake to about 20% from about 79%.

However, CBS said its decision was “subject to Delaware Court Approval”.

‘Significant threat’

Tensions between the two sides were triggered by Shari Redstone’s efforts to merge CBS with Viacom, another National Amusements company.

Earlier this week, CBS said the proposal was not in the firm’s interest.

It also announced plans to consider reducing National Amusement’s voting power by issuing a special dividend at the board meeting on Thursday.

The firm argued that Ms Redstone’s interference in the merger process and other actions posed “significant threat of irreparable and irreversible harm” to CBS.

CBS had sought a temporary restraining order against National Amusements ahead of the meeting, arguing that Ms Redstone would block the plan to reduce her voting power by changing the board or its bylaws.

However, Delaware Chancery Court Chancellor Andre Bouchard said “a truly extraordinary set of circumstances would be necessary to grant such a request”.

“I am not convinced that the harm plaintiffs fear would be irreparable,” he wrote.

“To the contrary, the court has extensive power to provide redress if Ms Redstone takes action(s) inconsistent with the fiduciary obligations owed by a controlling stockholder.”

‘Unprecedented motion’

National Amusements, which operates cinemas in the US, UK and Latin America, controls about 80% of the voting power at both CBS and Viacom through a dual share class structure. The firm’s ownership stake is lower.

After CBS filed the lawsuit, National Amusements moved to amend the board’s bylaws, requiring a supermajority for certain measures.

National Amusements said the judge’s decision was “a vindication of National Amusements’ right to protect its interests.”

It said: “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.”

Viacom and CBS were previously part of the same company, but Sumner Redstone, Shari’s father, separated the two firms in 2005.

CBS subsidiaries include its flagship television network, television studios and the Simon & Schuster publishing firm.

Viacom includes Paramount, as well as media brands such as Nickelodeon,

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