The Hatfield-McCoy-like battle between National Amusements Inc. chair Shari Redstone and CBS chairman and CEO Les Moonves continued to escalate Tuesday, after NAI filed a counterclaim with Delaware Chancery Court claiming it never demanded a merger between the broadcaster and its former corporate sister Viacom, adding that it has already told Viacom’s board it no longer supports a deal.

NAI’s suit comes in response to a CBS filing last week asking the court to push through its request for a special dividend that would ultimately dilute NAI’s voting control of CBS from 80% to 20%. NAI has since amended its bylaws so that any vote on issuing dividends would require a super-majority (about 90%) of board votes to be approved.

CBS and Viacom split in 2006, partly in an effort to unlock value at the cable networks by unshackling them from what at the time were thought to be CBS’s low-growth assets. But in the decade since the split the opposite has happened – CBS has grown into the most-watched broadcaster in the country while Viacom has struggled.

Redstone has requested that both sides evaluate a recombination twice – in 2016 and 2018 – with both sides convening special committees of independent directors to look into the matter in February.

CBS has contended that NAI is determined to push through a merger and alleges it has tried to tamper with its board makeup to ensure that happens.

In a statement, CBS said it still fears NAI and Redstone has abused its power and can no longer be trusted to act in the interests of all shareholders.

“Today’s reactive complaint from NAI was not unexpected,” CBS said in a statement. “The amended complaint filed last week by CBS and its Special Committee details the ways in which NAI misused its power to the detriment of CBS shareholders, and was submitted after careful deliberation by all involved. We continue to believe firmly in our position.”

But NAI claims it would not support a merger that was not approved by the boards of both companies and that the main motivation for the recent flurry of lawsuits is that Moonves is tired of having a boss.

“CBS board and special committee took their actions not in response to any genuine threat, but instead because Les Moonves has tired of having a controlling shareholder,” NAI said in a statement. “While Les Moonves is an extremely capable television executive, neither he, nor the board acting at his behest, is entitled to strip NAI of its voting control.”

According to the Tuesday filing, Redstone and Moonves apparently agreed that a merger could be beneficial earlier in the year, adding scale to both companies as their peers continued to do deals to beef up their offerings. But CBS soured on a combination later on, especially after Moonves chafed at recommendations that current Viacom CEO Bob Bakish be given a prominent role in the combined entity.

In the Tuesday filing, NAI said that it acquiesced to Moonves’ demands that Bakish not be named his successor when Moonves is no longer CEO, adding that the CBS chief has reaped more than $700 million in salary and bonuses from the company during his tenure. In his latest employment deal renewed in May 2017, CBS cannot reduce Moonves’ salary or bonus and the company must consider increasing his compensation if it falls below that of any other media executive. Moonves deal also includes a $180 million payout if he terminates his employment for good reason, including the naming of a current or former media CEO to the board, or if a majority of the board, its compensation committee or the nominating and governance committee are not “Original Independent Directors.” 

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.

At the heart of the matter are NAI’s efforts to combine CBS with its former corporate sister Viacom. NAI wants the merger to happen, and CBS would apparently rather do anything else.

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.