A high-stakes courtroom battle over governance of CBS Corp. sent the programmer's shares on a bumpy ride during the week ended May 18, while sister company Viacom Inc.'s stock moved mostly lower after news that CBS' independent directors opposed efforts to merge the two companies.
CBS' independent directors on May 17 effectively voted to dilute control of the company's controlling shareholder, National Amusements Inc., though it remained unclear May 18 whether the effort would hold up in court.
The dividend, if issued, would bring National Amusements' voting interest down from about 79% to 17%, according to a CBS press release. It was widely believed National Amusements' representatives would vote against the dividend after CBS was denied a temporary restraining order to keep National Amusements out of the vote. CBS did not detail its controlling stakeholder's actions during the meeting in the release, but it said that should a court rule in favor of allowing CBS to proceed with the dividend, payment would occur about 15 days later.
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The potential merger of CBS and Viacom is central to the battle between CBS' independent directors and National Amusements. CBS alleges National Amusements President Shari Redstone undermined its independent director's ability to perform their fiduciary duties in evaluating the merger and pushed for a deal price $3 billion above CBS' valuation of Viacom. Redstone has denied this. On May 13, the CBS board's special committee determined a CBS/Viacom merger "is not in the best interests of CBS stockholders, other than NAI." While denying the restraining order request hours before CBS' May 17 board meeting, a Delaware judge said CBS and its independent directors appeared to have concerns that could be considered by the courts at a later date.
Ahead of the board meeting, National Amusements on May 16 amended the company's bylaws to require that certain board actions, including dividends and bylaw changes, be approved by a supermajority of the CBS board of directors. Under the amendment, dividends would require approval by 90% of the directors then in office at two separate meetings held at least 20 business days apart. Of CBS' 14 board members, three, or roughly 21%, are NAI designees.
"In light of the Board's action today, that action was plainly necessary, and it is valid," National Amusements said in a May 17 statement. "CBS management and the special committee cannot wish away the reality that CBS has a controlling shareholder," NAI added.
CBS' shares inched up toward the beginning of the week, but declined later. CBS' stock was trading at $52.13 midday May 18, down 0.74% from its May 11 close.
Viacom's shares declined steadily throughout most of the week. It stock was trading at $27.35 per share at 12 p.m. ET May 18, down 9.5% from the May 11 close.
Elsewhere in media and entertainment, representatives of the major U.S. broadcast networks engaged in upfront sales presentations for advertisers interested in the 2018-2019 programming season. Walt Disney Co. saw some of the biggest gains as it pitched for its portfolio of networks, including ABC (US) and ESPN (US). The company recently launched a direct-to-consumer offering for the sports network, ESPN+, which it hopes to use to retain viewership with younger consumers interested in streaming. Disney's shares were trading at $104.05 midday May 18, up nearly 2% from their May 11 close.
In telecommunications, Sprint Corp. on May 15 provided more detail to its 5G network expansion plans. It added New York City, Phoenix and Kansas City, Kan., to list of markets that will receive 5G services in the first half of 2019, joining Atlanta, Chicago, Dallas, Houston, Los Angeles, and Washington, D.C., the first markets where Sprint plans to offer 5G. Also during the week, Sprint on May 17 unveiled an online marketplace for various internet of things services for business, including refrigeration temperature monitoring for grocery stores and energy management tools, among others.
Sprint's shares were trading at $5.07 12 p.m. ET May 18, down 1.74% from their May 11 close.

