The Redstone family, which owns a controlling interest in CBS and Viacom, filed a complaint against CBS CEO Les Moonves and the company’s other directors challenging CBS’s move to dilute the Redstones’ stake in the broadcaster.
The complaint, filed in Delaware Chancery Court Monday, calls the actions by the CBS directors “unprecedented under Delaware law” and notes that while Moonves has been a successful CEO, “neither he, nor the board acting at his behest, is entitled to strip [Redstone family holding company National Amusements] of its voting control.”
The court papers also said that Moonves and Shari Redstone had at one point agreed that combining CBS and Viacom would benefit both companies’ shareholders by creating greater scale. Redstone says she told Moonves that her family’s holding company would consider relinquishing its controlling interest in order to get that transaction done.
CBS, headed by Moonves, has been at war with the Redstone family, led by Shari Redstone, daughter of ailing media mogul Sumner Redstone. After forcing out Viacom CEO and Sumner Redstone favorite Philippe Dauman two year ago, Shari Redstone has twice encouraged CBS and Viacom to consider a combination.
CBS has balked at the combination for several reasons. One was Redstone’s demand that new Viacom CEO Bob Bakish be a senior player in the new company. Another was the strategic issue that owning Viacom’s ailing cable networks would weaken CBS’s ability to push retransmission fee increases and move into over-the-top and direct to consumer businesses.
Two weeks ago CBS’s board voted to pay shareholders a dividend that would reduce the Redstone stake in CBS. The vote was contingent on approval by the Delaware courts.
CBS reacted to the Redstone complaint, saying: “Today’s reactive complaint from NAI was not unexpected. The amended complaint filed last week by CBS and its Special Committee details the ways in which NAI misused its power to the detriment of CBS shareholders, and was submitted after careful deliberation by all involved. We continue to believe firmly in our position.”
In the new complaint, NAI and Shari Redstone said they did not and do not intend to force CBS and Viacom to combine, whether by removing and replacing CBS directors or otherwise.
Shari Redstone added that NAI has told the Viacom board it no longer supports a merger.
NAI and Redstone said thy have done nothing to undermine Les Moonves or interfere with CBS management.
In the complaint, Redstone said that under CBS’s current ownership structure, Moonves has made more than $700 million over his tenure as CEO but “ apparently give CBS directors “an ultimatum: Either you remove NAI’s voting control, or I resign.” He complain notes that Moonves has a $180 million golden parachute as part of his employment agreement.”