


NEW YORK — Entertainment mogul Shari E. Redstone and CBS chief executive Leslie Moonves, whose careers have been entwined for nearly 20 years, appeared to be getting along famously as recently as February, when they sat in the CBS box at Super Bowl LII in Minneapolis, both rooting for the New England Patriots.
Now, the two media heavyweights are in the early rounds of a bout over the fate of two of the world’s most prominent media and entertainment companies, CBS and Viacom. They are at an impasse because of Redstone’s desire to merge the two companies, which are corporate siblings. Moonves is firmly against the proposed merger.
At stake is Moonves’ career at CBS, which he took from last place to the most-watched television network, with hits like “The Big Bang Theory,’’ “Survivor,’’ and “Young Sheldon.’’
On Thursday, there were two developments in the dispute. First, a judge ruled against an effort by CBS to block Redstone from having what is perceived as outsize influence over its board, which had scheduled a meeting to vote on reducing the influence of the Redstone family on CBS. Then, at a meeting later that day, the board voted 11-3 to dilute Redstone’s voting stake to roughly 20 percent from nearly 80 percent.
By evening, both sides had proclaimed victory, and the only sure thing was that they were all headed back to court.
A former criminal defense lawyer, the Massachusetts-born Redstone, 64, joined National Amusements, the flagship company in the empire founded in 1993 by her father, 94-year-old Sumner Redstone. She proved her corporate mettle in pulling out a victory in an earlier boardroom fight against another formidable rival, Philippe Dauman, the former Viacom chief executive. Shari Redstone ousted Dauman and replaced him with an executive more to her liking, Robert Bakish, in 2016.
Redstone’s main opponent, Moonves, 68, is a native of Long Island who began in show business as a bit-part television actor before recasting himself as a go-to producer and, later, as the confident network executive.
She is fighting for control of her father’s empire. He is fighting to retain power over the portion of it that he controls. Redstone may have the power to reach her goal, however, given her role as the head of the family business, which has a nearly 80 percent voting stake in CBS and Viacom, both of which are public companies.
The CBS board meeting began at 5 p.m. on the 35th floor of the CBS Building, known as Black Rock, in midtown Manhattan. According to a person familiar with the gathering, Redstone and Moonves were both present. The mood was tense.
The day before the meeting, Redstone had changed the board’s bylaws to require a 90 percent supermajority for any motion to carry. With the 3 people voting against the attempt to lessen Redstone’s share, CBS had only 78 percent of the vote.
In a statement issued afterward, National Amusements said it “has no intention of forcing a merger that is not supported by both CBS and Viacom. 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.’’
CBS rejected that view, saying in a news release after the meeting, “The board of directors has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders’ interests and would unlock significant stockholder value.’’
The decision by CBS to file a lawsuit against Redstone on Monday was an early salvo in its effort to block her from achieving her ambition of reuniting the two companies, which had been one and the same from 2000 to 2006. That suit ended in a loss for Moonves. Still, the 17-page decision by Chancellor Andre G. Bouchard of Delaware’s Court of Chancery left a door open for CBS to challenge any further moves by its main shareholder down the line.
Redstone and her father first spoke of reuniting CBS and Viacom in 2016. The plan seemed to depend on her winning over Moonves, whom she had originally hoped would run the combined entity. But he was not on board with the plan, believing it to help a struggling Viacom but not a prospering CBS. Moonves also sought freedom to run the combined companies as he chose.
The talks renewed in January, with specially appointed committees at CBS and Viacom evaluating the proposed combination. Two weeks before attending the Super Bowl, Moonves and Redstone sat in the front row of the box used by New England Patriots owner Robert Kraft during the AFC Championship Game.
The committees working on the merger reached a preliminary agreement last week, according to people with knowledge of the discussions. But Moonves resisted giving his counterpart at Viacom, Robert Bakish, any management or board role at the combined company. Soon after, the feud was in the open.
The recent split seems to have come as a surprise to Redstone. “It’s so hurtful, because Shari thought she had a good relationship with Les,’’ said an associate of Redstone. This person spoke on condition of anonymity because of the sensitive nature of the relationship between the two executives.
The judge’s ruling was a blow to Moonves, a highly paid and well-respected media mogul who has long resisted Redstone’s quest to merge his company with its corporate sibling, Viacom. Still, the decision left a door open for CBS to challenge future moves by its main shareholder.
The ruling denied CBS’s request for a temporary restraining order against Redstone. CBS had sought to prevent her from interfering with a board meeting scheduled for 5 p.m. Thursday at which board members were to vote on a special stock dividend that would have reduced her voting stake to 17 percent from 79 percent.
In suing Redstone, her father, Sumner M. Redstone, and their company, Norwood, Mass.-based National Amusements, which owns CBS and Viacom, CBS argued that Shari Redstone could seek to replace the company’s current directors with her allies in a maneuver similar to one she previously executed at Viacom. (Shari Redstone, through her family’s holding company, denied considering such a move at CBS.)
Bouchard’s ruling came amid a whirlwind week when the tension between CBS and its owner erupted into all-out war. On Monday, CBS sued Redstone, asking for the temporary restraining order. On Wednesday, less than an hour before the hearing in Delaware was to begin, Redstone moved to amend CBS’s bylaws to effectively give her control of the board.
In his decision,
The judge wrote that CBS would have other legal avenues to challenge Redstone if the network believed that she had violated its independence.
“I am not convinced that the harm plaintiffs fear would be irreparable,’’ Bouchard wrote. “To the contrary, the court has extensive power to provide redress if Ms. Redstone takes action(s) inconsistent with the fiduciary obligations owed by a controlling stockholder.’’
In a statement, National Amusements said, “We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights. The court’s ruling today represents a vindication of National Amusements’ right to protect its interests. As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors.’’
CBS, in its own statement, said that although it was disappointed by the outcome, “the ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will do so. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.’’
As for the board meeting scheduled for Thursday, CBS said it would proceed as planned.