The CBS board is considering issuing a dividend from Class A stock to shareholders across Classes A and B to dilute National Amusements' voting interest from 79 percent to about 17 percent.
CBS Corp. essentially declared war on Shari Redstone on Monday, filing a lawsuit meant to thwart her effort to push through a merger of CBS and Viacom Inc. During the course of the special committee's negotiations regarding a possible merger, the suit alleges that Ms. Redstone refused to agree to typical public company governance or submit any potential transaction to a vote of all of the unaffiliated public stockholders of CBS.
"NAI had absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies".
National Amusements also controls around 80% of the voting shares of Viacom.
Mid-Monday morning trading of CBS stock was up 1.2% to $53.23; Viacom was down 7% to $28.15.
Viacom has made it no secret that it wants Moonves at the helm of a combined company, but the talks between the two have hit an impasse regarding the line of succession.
A DE court ruled in 2004 that the Hollinger board could dilute Black's voting control in response to what it considered to be the damage he had done to the company.
Redstone could counter sue CBS directors for a breach of loyalty, the sources said.
Its proposed dividend would not dilute the economic interests of any CBS stockholder, but would help the company to operate as an independent, noncontrolled company and fully evaluate strategic alternatives, the company said. While there may be an obvious cultural misalignment between Verizon and CBS, a tie-up between the No. 1 US wireless carrier and the TV-network owner would be a natural response to the $109 billion pending merger between their rivals, AT&T Inc. and Time Warner Inc.
If Verizon-or any other suitor-presents a more compelling offer for CBS than a merger with Viacom, Moonves is right to push for that outcome because it'd be the better route for CBS shareholders. Verizon declined to comment.
CBS is pursuing a temporary restraining order against Redstone to prevent alleged abuse of voting control and interference with intended share dilution.