Leslie Moonves, chief executive officer of CBS Corporation, attends the annual Allen & Company Sun Valley Conference, July 5, 2016 in Sun Valley, Idaho. (Photo by Drew Angerer/Getty Images)
CBS and its Chief Executive Les Moonves have gone to the mattresses in an effort to subvert the control Shari Redstone and her family’s holding company National Amusements has over the media company.
But if this skirmish doesn’t go the way Moonves and CBS hope — and some analysts don’t think it will — the company’s leadership could be trouble.
“I think Les Moonves is done,” Ross Gerber, CEO of investment firm Gerber Kawasaki, told TheWrap. “I don’t think this ends well for Les or CBS. It’s not his company. He doesn’t own it, and I think he’s going to learn the hard way.”
Redstone, despite public pushback from Moonves, has been pressing for CBS and sister company Viacom to merge for the better part of two years.
The CBS board, arguing that Redstone’s pressure has hurt the company and shareholders, voted on Thursday to dilute Redstone’s voting power to 20 percent from nearly 80 percent.
The decision was made, CBS said, in a unanimous vote of the company’s directors who are not affiliated with National Amusements. That is important because the vote isn’t final.
Redstone changed the company bylaws ahead of the board meeting on Thursday, requiring CBS have a 90 percent “supermajority” vote to approve diluting her stake. Redstone effectively controls three seats on the board, which would have made a CBS supermajority vote next to impossible.
CBS is set to challenge the validity of the bylaws change and is awaiting a court’s approval on the special dividend that would dilute Redstone’s control. CBS said on Thursday that it doesn’t believe the changes are valid or effective.
There’s no legal precedent for the CBS board is doing, so how the court will rule isn’t clear.
“It’s hard to imagine Les Moonves being in that job much longer now, unless CBS comes out on top, and the odds, in my perspective, seem to be in National Amusements’ favor,” media analyst Tuna Amobi, of investment research firm CFRA, told TheWrap.
Moonves’ current contract runs through 2021, and if he’s removed before then, the company could be on the hook to pay him more than $184 million.
But Redstone also isn’t afraid to go to war with her company’s leadership and oust a CEO. Just ask Philippe Dauman, who Redstone pushed out at Viacom in a messy tug-of-war for control back in 2016.
Needham analyst Laura Martin wrote in a note to investors on Friday that any scenario where Moonves leaves would be the worst case for CBS shareholders, predicting shares dropping 14 percent if that happens. That would be a $10 billion swing of total value across all the company’s shareholders, compared to the perceived value were CBS to be acquired by a telecom company like Verizon, she said.
National Amusements will want to find a resolution that is in the interests of all shareholders, a person familiar with the situation told TheWrap.
“[Moonves] is a great executive and he’s done a great job leading that company, but now Les and Shari have both hurt the company,” Gerber said. “Her request to remerge the two companies is not a crazy request and after all this I think it’s still not going to be his company.”
Gerber said that if National Amusements comes out on top, he expects Redstone to take a similar approach she did at Viacom in 2016: Remove the CEO and call a shareholder vote to replace the board.
9 Biggest Billion-Dollar Entertainment and Media Deals in 2017 (Photos)
While all eyes were on AT&T's $85 billion acquisition of Time Warner, announced in late 2016 but facing an antitrust lawsuit from the Justice Department, there were plenty of other megadeals in media, tech and entertainment that kept investment bankers busy in 2017.
Here are some of the biggest deals of the year:
Getty Images
Disney to acquire most of 21st Century Fox for $52.4 billion
In a massive deal that could change the entertainment industry even more than AT&T-Time Warner, Disney announced plans to acquire Fox's film and TV studios and much of its non-broadcast television business, including regional sports networks and cable networks such as FX, FXX and Nat Geo. Disney would also pick up Fox’s stake in the European pay-TV giant Sky — and be better positioned to win regulatory approval to complete the acquisition of the 61 percent of the company it does not already own.
Discovery Communications agrees to buy Scripps Networks Interactive for $11.9 billion
The merger of two cable powerhouses brings together channels including Discovery, Science, Food Network and HGTV – and could give the combined company a stronger position as pay-TV continues to migrate to the internet.
Discovery/Scripps
Sinclair Broadcast Group agrees to buy Tribune Media for $3.8 billion
This deal, if approved, would give conservative-leaning Sinclair control of 223 stations in 108 markets, including 39 of the top 50, covering 72 percent of households in the country. And it's only possible under rule changes implemented by new FCC Chairman Ajit Pai.
Sinclair/Tribune
Cineworld offers to buy Regal Cinemas for more than $3 billion
After a string of movie theater mergers last year, the sector has quieted down -- along with the box office. And while this isn’t yet a done deal -- or even an accepted offer -- British chain Cineworld made a late November bid of $23 a share for the U.S.’s No. 2 cinema chain.
Cineworld/Regal
Meredith Corp. acquires Time Inc. for $2.8 billion
The magazine megadeal is a sign of changing times in the publishing industry, with the owner of esteemed brands like Time, Fortune and Sports Illustrated selling to the parent of Better Homes and Gardens and Country Life – backed by $650 million from big-time conservative donors the Koch brothers.
Meredith/Time
Verizon acquires Straight Path Communications for $2.3 billion
Straight Path may not be a household name, but it was the subject of a bidding war between AT&T and Verizon. The company is one of the largest owners of millimeter wave spectrum, seen as key to the buildout of 5G networks, which should power much faster mobile internet -- better for video -- in the near future.
Verizon/Straight Path
Disney buys the rest of BAMTech for $1.6 billion
The Mouse House jumped into internet TV in a major way in 2017, announcing upcoming Disney and ESPN-branded streaming services and acquiring the rest of streaming tech company BAMTech to power those products.
Disney/BAMTech
Entercom buys CBS Radio for $1.5 billion
CBS Radio was intended to be spun off from its broadcast parent in an IPO, but instead it was scooped up by a competitor. The combined company, now the second largest radio business in the country, owns and operates 244 stations in 47 markets.
Entercom/CBS Radio
MGM buys the rest of Epix for $1 billion
The independent studio went all in on the pay-TV business, buying the rest of the premium cable network from Viacom and Lionsgate. And that's paid immediate dividends, as MGM's media networks division propelled it to a strong third quarter.
MGM/Epix
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Rewind 2017: Media and content consolidation continued this year
While all eyes were on AT&T's $85 billion acquisition of Time Warner, announced in late 2016 but facing an antitrust lawsuit from the Justice Department, there were plenty of other megadeals in media, tech and entertainment that kept investment bankers busy in 2017.