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CBS responded in a statement:
The latest step by N.A.I. provides further evidence of why we concluded that we had no choice but to file our action in the Delaware courts, in order to protect the interests of all CBS shareholders. We believe the N.A.I. action is unlawful, and we are confident in our position and look forward to presenting our case in court.
— Michael de la Merced
CBS is overstepping its bounds, Shari Redstone says
Ms. Redstone’s National Amusements has filed its legal response to a CBS lawsuit, seeking to prevent her from blocking a special meeting of its board on whether to water down her controlling stake. The response comes ahead of a hearing on the matter at 2 p.m. on Wednesday, a potentially pivotal moment in the drama over Ms. Redstone’s efforts to merge CBS with its corporate sibling, Viacom.
Here are some of the notable parts of the filing by lawyers for National Amusements:
• On CBS’s contention that Ms. Redstone intends to replace its board because of its resistance to a deal: “N.A.I. does not have, and has never had, any intention of replacing the CBS board or taking other action to force a merger.”
• Why Delaware’s Court of Chancery should reject a CBS board move to dilute the Redstones’ voting power to 17 percent from 79 percent: “This is an unprecedented usurpation of a controlling stockholder’s voting power.” Later, Ms. Redstone’s lawyers add, “This court has held that, absent a compelling justification (which is non-existent here), a board of directors breaches its fiduciary duty of loyalty by acting for the primary purpose of diluting a controlling stockholder’s voting rights.”
• The revelation of which CBS director National Amusements had suggested was involved in questionable activity. The filing includes an affidavit by Robert Klieger, a CBS board member and lawyer for the Redstones (whom other directors have argued is working on behalf of Ms. Redstone), regarding a call he had had last week with Bruce Gordon, the head of the CBS board’s special committee:
Specifically, I noted National Amusement Inc.’s discomfort with the continued CBS board position of Charles K. Gifford given certain incidents that took place in 2016 and 2017. I also discussed the possibility of facilitating Mr. Gifford’s exit from the CBS board with minimal disruption and public attention, including, in the event of a merger of CBS and Viacom, through his potential non-appointment to the board of a combined company.
• A lament for what Ms. Redstone is her current predicament:
“Plaintiffs have forced CBS’s controlling stockholder into a position of having to make a Hobson’s choice—of either accepting massive dilution of its voting power (thereby losing control of the company and suffering the economic detriment to its stake that entails), or acting as a stockholder to prevent such dilution and protect its voting power, knowing that doing so might trigger the departure of (and payment of massive parachute payments to) key management and directors of the company.
CBS filed a response to National Amusements saying that Ms. Redstone’s opposition to the special meeting is proof that CBS need a temporary restraining order.
“Unless restrained, defendants will use the consent process to replace directors or amend bylaws in advance of Thursday’s board meeting.”
The broadcaster’s case in Delaware’s Court of Chancery against its corporate parent, the Redstones’ National Amusements, is one of a number recently that challenge the kind of dual-class stock system used by the Redstones (and indeed by The New York Times Company).
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