It’s shaping up to be a headline-grabbing week for CBS Corp. On Wednesday, the company will hold its 2018-2019 Upfront presentation in New York. On Friday, CBS will hold its annual shareholders meeting.
Today, it is the talk of Wall Street, thanks to the filing of a lawsuit in Delaware by CBS Corp. and its Special Committee of its Board of Directors alleging breaches of fiduciary duty by National Amusements Inc. — the Shari Redstone-controlled entity that controls CBS and Viacom and wants the companies to recombine.
The lawsuit, says CBS, seeks to prevent National Amusement from interfering with a special meeting of the Board of Directors, at which the directors will consider declaring a dividend of shares of Class A common stock to all of the company’s Class A and Class B stockholders, as is permitted under CBS’s charter.
What does this mean for the Redstone-controlled National Amusements?
Today, it is the controlling shareholder of both CBS and Viacom. Should the CBS board declare the dividend, it would dilute National Amusements’ voting interest from approximately 79% to 17%.
In a terse explanation, CBS said the dividend would not dilute the economic interests of any CBS stockholder. But, it would greatly reduce Redstone’s power to demand a recombination of Viacom and CBS, which has weighed heavily on CBS shares.
“The Special Committee has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders’ interests and would unlock significant stockholder value,” CBS said. “If consummated, the dividend would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.”
Indeed, CBS shareholders appear to be more content without the weight of a relaunched Viacom to worry about. With Monday’s Closing Bell on Wall Street, CBS shares were up $1.14 to $53.66 — their highest close since April 4. Concurrently, Viacom’s Class B shares slumped $1.48 to $28.74 — bringing the company’s shares back to where they were in late November 2017.
National Amusements reacted by saying it is “outraged” that CBS would file a lawsuit, noting that it has “no intention of replacing the CBS board or forcing a deal that was not supported by both companies.”
“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,” National Amusements said. “We intend to defend our position vigorously and look forward to presenting our arguments in court.”