A judge is expected to decide Wednesday whether CBS can move forward with a rare corporate maneuver to strip Sumner Redstone and his family of their control over the company, which would thwart the Redstones' effort to merge CBS with Viacom.
CBS sued the Redstone family Monday, alleging that the mogul's daughter, Shari Redstone, was trying to railroad it into merging with Viacom Inc. even if the tie-up would harm rank-and-file CBS shareholders.
The Redstones also control Viacom, which owns MTV, Comedy Central, BET and Nickelodeon. CBS does not want to be saddled with the troubles of the weaker Viacom. Shari Redstone, meanwhile, believes the two companies would be stronger together as traditional media compete with such technology giants as Facebook, Google, Netflix and Amazon.
The Redstones -- through their investment vehicle National Amusements Inc. -- filed a brief in the case late Tuesday, calling CBS' attempts to strip it of its voting control "egregiously overbroad and unjustified" and said the move would be "an unprecedented usurpation of a controlling stockholder's voting power."
CBS plans to hold a special board meeting Thursday to issue a dividend that would give voting power to CBS shareholders who currently lack that power. That would dilute the Redstones' control over the company's affairs. Instead of controlling the company, with nearly 80 percent of the vote, the family's voting stake would be reduced to 17 percent.
CBS said there is a provision in its charter that allows for such a dividend. It asked the judge to block the Redstones from making any changes to its board before Thursday's vote can take place and the vote's results can be put into effect.
The Redstones' National Amusements asked the judge, Chancellor Andre G. Bouchard, to deny CBS' request.
A hearing is scheduled for 2 p.m. Eastern time on Wednesday in the Court of Chancery of Delaware.
Although much of the wrangling has centered on CBS' opposition to the proposed Viacom merger, there are deeper issues of trust at play. CBS Chief Executive Leslie Moonves has bristled over media reports that Shari Redstone has been conducting a stealth campaign to find a replacement for him.
Moonves prides himself on his successful 12-year run managing the broadcasting company with little management oversight from the Redstones. But that changed in the last two years as the family patriarch, Sumner Redstone, who turns 95 next week, became ill and Shari Redstone began taking a more active role in Viacom and CBS.