Redstone blasts CBS’ ‘outrageous’ shot at independence

They’ve come out fighting.

Hours after CBS on Monday fired the first shot in its battle for independence from Shari Redstone, the media mogul answered — saying she was “outraged” by the legal salvo.

The suit by CBS, led by Chief Executive Les Moonves, seeks to keep Redstone’s National Amusements Inc. at bay while the media company’s board maneuvers to deliver a stock dividend to shareholders — a move that would dilute NAI’s voting power in CBS to 17 percent from 79 percent.

“This precipitous lawsuit, and the efforts of CBS management and its ‘independent’ directors to wrest voting control from NAI, are outrageous,” NAI said in response to the CBS complaint. “We intend to defend our position vigorously.”

Privately held NAI, through super-voting shares, controls CBS and Viacom. While Redstone has been working to reunite the two media giants, Moonves has mostly resisted the idea.

Then led by Sumner Redstone, Shari’s now-ailing father, NAI split CBS and Viacom in two in 2006. Moonves is happy running his independent CBS and had quietly rebuffed merger talk.

Monday’s suit asserts CBS can maintain its independence by exercising a provision in its corporate charter that allows nonvoting Class B shareholders to receive dividends in the form of voting stock. Only Class A shares, controlled by the Redstone family, have voting power.

“The plain language of the charter authorizes the board to issue a stock dividend,” the suit contends.

CBS attributes the dividend provision to governance policies designed to protect shareholders from what Wall Street called “the Redstone discount.”

This discount resulted from investors who shied away from CBS stock because they thought, “I don’t want to be involved with any of these because we don’t know what Sumner will do,” the suit says, quoting an analyst’s comment from 2008.

CBS said its special committee unanimously voted on Sunday that a merger with Viacom transaction was not in its best interests.

On Monday, in addition to filing its suit, CBS moved for a temporary restraining order to protect shareholders from “serious threat of imminent, irreparable harm in Ms. Redstone’s potential response.”

CBS called for a special board meeting on May 17 to address the stock dividend, which may jeopardize NAI’s voting power going into CBS’ annual meeting on May 18.
More likely to follow are weeks of litigation over what John C. Coffee, director of the Center on Corporate Governance at Columbia Law School, called “an extraordinary move and an unusual one to expect Delaware to back.”

“Delaware accepts that controlling shareholders are entitled to exercise control — so long as they do not breach fiduciary duties,” he told The Post.

Since the split, CBS has authored a growth story while Viacom, the owner of Comedy Central, MTV and Paramount Pictures, which was thought be the more likely growth engine, has struggled.

CBS shares popped 2.2 percent, to $53.65, on Monday. Viacom stock fell 4.9 percent, to $28.74.