A Delaware judge on Wednesday essentially called a time out in the escalating feud between the board of CBS Corp and its controlling shareholder National Amusements Inc, owned by the Redstone family, which wants to merge it with Viacom Inc.
Chancellor Andre Bouchard said he would rule on Thursday on the request for a temporary restraining order (TRO) to prevent Shari Redstone from interfering with a special board meeting on Thursday, when the CBS directors will consider stripping her of control.
Wednesday's hearing capped three days of maneuvers with little precedent in corporate boardroom battles.
Earlier on Wednesday, National Amusements amended CBS's bylaws to thwart the company's directors from issuing a special stock dividend. Under the change, the dividend requires 12 of CBS' 14 directors to approve the dividend.
That dividend is aimed at cutting National Amusements' voting power to 17 per cent from 80 per cent.
National Amusements called the dividend "invalid."
Bouchard appeared troubled by the move to amend the CBS bylaws moments before the court hearing.
"I’ve never seen anything like what transpired here in terms of moving parts before TRO hearing and I need to protect my jurisdiction," he said. He said he would take the matter under advisement and rule on Thursday regarding the TRO.
The CBS board is set to meet at 5 p.m. EDT (2100 GMT) on Thursday to consider issuing the special dividend.
National Amusements (NAI) said it was compelled to act to protect its controlling position and the media company.
"NAI believes the irresponsible action taken by CBS and its special committee put in motion a chain of events that poses significant risk to CBS," National Amusements said in a statement.
In court filings on Wednesday, both sides said they were being forced to take extreme measures. National Amusements said it might have to sack the board to protect its voting power, and CBS said it might have to dilute the Redstones' voting control to prevent abuses.
The showdown comes as the Redstones were seeking to merge CBS and Viacom to create a company they say will be better able to compete in the media landscape that has been reshaped by the video-streaming companies like Netflix Inc.
A CBS special board committee has resisted that deal, citing in part concerns about corporate governance of the merged company.
National Amusements has said it believed CBS sought a temporary restraining order because National Amusements had raised specific concerns about incidents of bullying and intimidation by one CBS director, Charles Gifford.
"The allegations regarding him (Gifford) are not only vague and unsubstantiated, they are utterly inconsistent with our knowledge of him," CBS said in a statement.
National Amusements said on Monday it did not intend to replace the board, but on Wednesday signaled that had changed. It said it was facing a choice of accepting massive dilution or "taking various stockholder action to protect itself from dilution."
If forced out, directors and management could collect large "golden parachute" payments, according to National Amusements.
CBS Chief Executive Les Moonves could collect more than $150 million, and Barclays estimated the CBS management would receive $375 million in total.
CBS has said it is acting to protect shareholders and the company from abuses by Shari Redstone, whom the CBS board accused of undermining management by talking to potential CEO replacements and rejecting a potential acquirer of CBS.
The proposed dividend would not dilute the economic interests of any CBS stockholder, but would help the company to operate as an independent, non-controlled company and fully evaluate strategic alternatives, CBS has said.
Shares of CBS ended down over 1 per cent at $53.83 on the New York Stock Exchange. Viacom share were flat at $28.27.