CBS wants to shake off its parent company, National Amusements. Whether it will be allowed, however, is a matter for the courts.
The board of directors of CBS on Thursday voted 11-to-3 to issue a stock dividend, a move that would effectively remove National Amusements as the controlling shareholder of CBS.
The vote came at a specially convened board meeting at CBS headquarters in New York. The meeting lasted less than one hour, according to a source familiar with the meeting who was not authorized to speak publicly, and was aimed at diluting the voting power of National Amusements from 79 percent to 20 percent by issuing new shares of Class A stock to common shareholders.
National Amusements had tried to block the move by changing the CBS bylaws to require a supermajority vote to issue the dividend. CBS claimed in a press release that those new bylaws were "neither valid nor effective," allowing it to proceed with the vote. National Amusements contests that claim.
CBS noted that the dividend will need approval from a Delaware court.
Those who voted against the dividend were National Amusements president Shari Redstone, lawyer Robert Klieger and journalist David Andelman.
CBS Corporation, the company that comprises the CBS network and a host of other assets, including CNet and Showtime, wants to control its own destiny and prevent any merger with Viacom, which is also controlled by National Amusements. The two companies have had merger discussions that foundered over a role for Viacom's chief executive, Bob Bakish.
The two firms agreed to postpone the CBS annual meeting, which had been scheduled for Friday.
National Amusements, for its part, is arguing that it hasn’t tried to force any merger with Viacom and that it is not seeking to dump CBS directors, as CBS has contended.
National Amusements, which still counts 94-year-old Sumner Redstone as its chief executive, said in a statement: “Today’s board vote, while couched as an effort to prevent such a transaction, was pure pretext. CBS management and the special committee cannot wish away the reality that CBS has a controlling shareholder."
National Amusements also stated that its change to the bylaws prevented any dividends from being issued, since the vote did not meet the threshold of a supermajority.
"NAI yesterday exercised its legal right to amend the company’s bylaws to require a supermajority vote on certain board actions with respect to dividends, effective immediately," the company said in its release. "In light of the board’s action today, that action was plainly necessary, and it is valid.”