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CBS
Corp.
CBS 0.68%
is in talks with Shari Redstone and his family's holding company, National Amusements Inc., to settle their dispute over the broadcaster's control, less than a month before the trial, according to people familiar with the subject.
A framework for the settlement would imply that CBS is abandoning its attempt to deprive National Amusements of its voting control of the company by issuing shares as a dividend. In return, National Amusements would refrain from pushing for the merger of CBS and
Viacom
Inc.
for an undisclosed period, according to people familiar with the discussions.
An agreement would put an end to a corporate quarrel that could lead to an even more complicated court battle and would greatly help to determine who will be responsible for CBS attacks at a crucial time in the media industry.
The potential settlement under discussion could also lead to a reshuffle of the CBS board and push the annual meeting of CBS – initially scheduled for May and delayed by the fight – next spring, said the people aware of the discussions.
The fate of CBS chief executive Leslie Moonves, who is being investigated by two independent law firms for allegations of sexual harassment reported by the New Yorker, is not part of the talks, according to some people. Mr. Moonves lamented a behavior that made women feel uncomfortable, but denied having retaliated or harmed anyone's career when his advances were postponed.
CBS and National Amusements have been on trial at the Delaware Chancery Court since May.
CBS and five of its independent board members sued Ms. Redstone, her father, 95-year-old media mogul Sumner Redstone, and National Amusements, seeking to block a merger with Viacom 20%
CBS submitted that Ms. Redstone abused her power as majority shareholder, blocking the process of acquiring potential contenders such as:
Verizon Communications
Inc.
and the intention to revise the CBS Board of Directors to complete a merger with Viacom, which National Amusements also controls. Ms. Redstone denied these accusations.
National Amusements amended the by-laws of the CBS shortly before the board met to vote on the dividend, requiring a 90% qualified majority to approve such a decision. The CBS board of directors voted 11 to 3 for the dividend, less than the new threshold.
Following the filing of the complaint by CBS, National Amusements declared its intention not to force the merger nor to revise the CBS board.
Bruce Gordon, the main independent director of the CBS Board of Directors, is one of the key players in favor of a resolution. Gordon contacted other independent board members this week with a description of a potential settlement, said one familiar with the topic.
Both parties are encouraged to settle before trial. Lawyers on both sides spent the summer aggressively digging up documents and emails that would be detrimental to their opponents. a trial would highlight such information.
Already, the documentary phase of "discovery" of the legal battle has gathered text messages between Mr. Moonves and his second in command, Joseph Ianniello, citing scenes from "The Godfather" as they prepared to take action against CBS. Redstone, Variety reported.
CBS in a legal file revealed the existence of a video of Mr. Redstone, toured by a company director, who showed the status of the nabob in trouble. According to CBS, the video raises doubts as to the Nabob's ability to approve his daughter's movements, an issue likely to play a role in the trial. National Amusements, who maintained that Mr. Redstone had mental abilities, successfully fought to keep the video out of public view at the next trial.
For Mrs. Redstone, a defeat in Delaware would cost her control of her family.
Meanwhile, CBS and Viacom have been on the sidelines, rival media companies pursuing mergers to prepare for a future in which traditional business sectors are stagnating, as consumers increasingly cut cable TV and streaming online. Uncertainty about the future of CBS and Viacom has sometimes weighed on the stock prices of companies.
The dispute with CBS echoes a similar fight led by Mrs. Redstone with the leaders of National Amusements and Viacom over the control of these companies.
In the case of National Amusements, Mrs. Redstone managed to change the board of directors to assume greater control over the holding company. It then entered into an agreement with Viacom that resulted in the resignation of Viacom's General Manager Philippe Dauman and the departure of five members of the Board.
Write to Keach Hagey at [email protected] and Joe Flint at [email protected]
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