Delaware Chancery Court Chancellor Andre Bouchard issued his ruling shortly before noon Thursday, and CBS immediately announced it would proceed with a planned board of directors meeting and vote later this evening.
CBS said in a statement that it had cancelled its annual meeting of stockholders, scheduled for Friday, where investors were expected to vote on a slate of directors to the board. "Today's board vote, while couched as an effort to prevent such a transaction, was pure pretext".
This week, a CBS committee decided the proposal was not in the firm's interest. "In light of the board's action today, that action was plainly necessary, and it is valid".
Update: The judge has ruled against CBS' request for a temporary restraining order.
If the board strips Redstone's controlling stake, CBS and Captain Moonves will be free to woo new suitors in place of Viacom.More news: Costco (COST) vs. Its Peers Head to Head Survey
"CBS management and the special committee can not wish away the reality CBS has a controlling shareholder", Thursday's statement from National Amusements reads. The board members said they were seeking a temporary restraining order to stop Redstone "from interfering" in Thursday's vote.
CBS said its newly declared dividend would be "conditioned on a final determination by the DE courts", including the exhaustion of all appeals.
As CBS continues to lose value, it has sought partners to help spur growth - but now, with Redstone strong-arming it into an unwanted Viacom partnership, its stock is tanking even harder. While we are disappointed that the judge did not grant a TRO, 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. (NYSE:CBS) by 5.5% during the first quarter, according to the company in its most recent filing with the Securities & Exchange Commission.
National Amusements said the judge's decision was "a vindication of National Amusements' right to protect its interests". After Thursday's court decision, it 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". It is unclear if CBS will go forward with a board meeting later in the day.
The Redstone holding company controls about 10 percent of the equity of CBS but has almost 80 percent of the voting power through a special share class.More news: Zuckerberg to meet European Parliament leaders
Presumably, one of those alternatives could be to allow another company to purchase CBS, as CBS previously insinuated that Shari Redstone may have already scuttled a potential deal that would have had a larger company - possibly Verizon - acquiring CBS.
"Ultimately, we believe it is hard to imagine Moonves having a role in the combined company", BTIG Research analyst Richard Greenfield said in a note to clients this week.
While denying the restraining order, Bouchard noted that CBS could still file a court challenge if NAI takes actions that are inconsistent with its fiduciary obligations to the company and to other shareholders. As Bouchard said, NAI's right to protect their controlling interest in CBS was valid, and has legal precedent.More news: Mayawati to Congress: No need to call JDS B-team of BJP