Is Les Moonves Done as CBS CEO?

Analyst says Moonves leaving would be worst case scenario for shareholders

Last Updated: May 18, 2018 @ 2:02 PM

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.