Judge mulls CBS restraining order against major shareholder

A Delaware judge ordered a pause on Wednesday in a dispute between CBS and its majority shareholder that could decide control of the company.

Chancellor Andre Bouchard granted CBS a temporary restraining order prohibiting National Amusements Inc. from taking any action to thwart a scheduled Thursday board vote on a dividend that would dilute National Amusement's preferred stock voting power from 80 percent to 17 percent, effectively giving CBS independence.

But Bouchard said he was granting the restraining order only to preserve his jurisdiction while he gives the matter further consideration, and that he would rule Thursday on whether the order should remain in effect.

"I've never seen anything quite like what's transpired here in terms of moving parts," Bouchard said.

Earlier Wednesday, barely an hour before the hearing, National Amusements informed the court that it had rewritten CBS' bylaws to require a "supermajority" to approve the dilutive dividend.

That filing came in response to a complaint filed Monday by CBS against National Amusements, led by the daughter of billionaire media mogul Sumner Redstone.

CBS has been fighting pressure by National Amusements to merge with Viacom, which also is controlled by National Amusements.

CBS has alleged that Shari Redstone and NAI, in pushing for a merger that CBS has determined is not in its best interests, have tried to undermine the authority of the CBS board and management, led by CEO and chairman Les Moonves.

CBS, along with a special committee of independent directors formed to consider the merger proposal, asked Bouchard for a restraining order to prevent Shari Redstone and NAI from attempting to replace CBS board members or to modify corporate governance documents before any action taken at Thursday's board meeting, which is scheduled for 5 p.m., becomes effective.

Meanwhile, CBS has pledged that if the board approves the dividend, it would not issue any shares or cause the dividend to become effective without the judge's consent.

"This is not a nuclear option," CBS attorney Ted Mirvis told Bouchard. "The board meeting is not game over. The board meeting is game on."

Meredith Kotler, an attorney for Redstone and NAI, told the judge that CBS has forced her clients' hands in proposing the dilutive dividend, hastily scheduling a board meeting to vote on it, and ambushing NAI with a lawsuit seeking to prevent it from exercising its rights.

Kotler said that in trying to prevent NAI from forcing a merger with Viacom, CBS wants to strip its controlling shareholder of "all voting power, on anything, for all time."

"It's not modest. It's not temporary," she told Bouchard.

Kotler also said suggestions that NAI intends to force a merger with Viacom by replacing CBS' independent directors is based on "speculation" by media outlets and pundits.