Early Thursday, a Delaware court handed Shari Redstone and her family-owned National Amusements an important legal victory in a fight for control of CBS.
Just hours later, CBS' board of directors responded with a vote to reduce Redstone's control – but the battle is far from over.
Redstone's National Amusements is the controlling shareholder of CBS, and the court's ruling Thursday lets it challenge the vote by CBS' board.
The vote by CBS' board would let it issue a dividend that dilutes Redstone's preferred stock voting power to roughly 20 percent from the current 79 percent. Such a move would effectively give CBS independence from National Amusements.
CBS had sought a restraining order this week to block Redstone, president and controlling shareholder of National Amusements, from making changes to the board. The court's decision could boost Redstone's long-stated efforts to merge CBS with entertainment giant Viacom, which National Amusements also controls.
"The court's ruling today represents a vindication of National Amusements' right to protect its interests," the company said in a statement. "As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors."
CBS has said combining with Viacom is not in the best interests of shareholders.
Although Delaware court Chancellor Andre Bouchard said in the ruling there was no legal precedent for granting CBS's request for a restraining order, he said the company could challenge National Amusements in court if it takes actions that could harm shareholders. In a statement, CBS signaled that it may pursue further legal action against National Amusements.
"The judge today found that the allegations in our lawsuit 'are sufficient to state a colorable claim for breach of fiduciary duty against Ms. Redstone and NAI as CBS' controlling stockholder,'" CBS said. "We could not agree more. While we are disappointed that the judge did not grant a [temporary restraining order], 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."
In what may end up as a largely symbolic move, CBS announced late Thursday that its board of directors had voted to issue a dividend equivalent to 0.5867 in non-voting shares for each voting share. That would dilute Shari Redstone's preferred stock voting power to roughly 20 percent from the current 79 percent.
"If consummated, the dividend would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives," CBS said in a statement after the board meeting to discuss the issue.
Notably, however, CBS said the dividend offer would depend on the Delaware court authorizing the payment. That could be a tall order because of Bouchard's ruling that 90 percent of CBS' board would need to approve the dilution measure. Redstone, along with family lawyers Robert Klieger and David Andelman, serve on the board, according to a report by Deadline.
CBS also said it is postponing its annual shareholders meeting, which had been scheduled for Friday.
Shari Redstone is the daughter of media magnate Sumner Redstone, who led National Amusements to take over Viacom in 1987 and, in 2000, CBS. Viacom and CBS split in 2006.
National Amusements owns a majority of the voting shares in both CBS Corp. and Viacom, the media company behind Paramount Studios and the cable networks Comedy Central, MTV and BET.
CBS is the corporate parent of CBS News and CBS MoneyWatch.
Shares of CBS fell 4 percent on news of the judge's ruling, while shares of Viacom were down 0.4 percent.
-- The Associated Press contributed to this report