CBS symbolically escalated the ongoing battle with its largest shareholder, National Amusements Inc., Thursday (May 17), voting to issue a special dividend that would dilute NAI’s voting control but with questionable power to do so.
CBS and NAI have been at loggerheads since Monday (May 14), when the broadcaster filed suit in Delaware Chancery Court requesting a temporary restraining order against NAI to stop it from interfering at a scheduled meeting of CBS’ board of directors. That meeting, held Thursday at 5 pm, is where the board was scheduled to vote on the special dividend.
CBS lost its quest for the TRO, and a move by NAI to change CBS's bylaws Wednesday (May 16) made the dividend vote essentially moot. But that didn’t stop CBS from holding the vote anyway, and the broadcaster said that a unanimous vote of the directors not affiliated with NAI approved a pro rata dividend of 0.5687 shares of Class A common stock for each share of the Company’s Class A common stock and Class B common stock to stockholders of record on the record date. But there is a catch — in order for the dividend to be issued, it has to be approved by the Delaware court.
“The payment of the dividend is conditioned on a final determination by the Delaware courts, including a final decision on or the exhaustion of time for any appeals, that the dividend is permissible," CBS said in a statement. “The company believes that the written consents delivered by NAI purporting to amend the company’s bylaws are neither valid nor effective.”
NAI begged to differ.
“As National Amusements has repeatedly stated, it has no intention of forcing a merger that is not supported by both CBS and Viacom,” NAI 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. 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. In light of the Board’s action today, that action was plainly necessary, and it is valid.”
Nevertheless, CBS said that in light of recent developments, it is postponing its annual shareholders meeting, scheduled for Friday (May 18), to a later date.
“The Board will determine shortly a new record date for the meeting and will publicly announce the new date, time and location,” CBS said in the statement. “The postponement will provide all constituents with additional time to consider all pertinent matters before the annual meeting.”
In other words, both sides live to fight another day.