AT&T Expressed Interest in CBS to Shari Redstone Before Time Warner Deal
June 24 2018 - 7:29AM
Dow Jones News
By Joe Flint and Drew FitzGerald
Before AT&T Inc. Chief Executive Randall Stephenson set his
sights on Time Warner Inc., he expressed interest in acquiring CBS
Corp. and met with Shari Redstone, the executive whose family
controls the media company, according to people familiar with the
situation.
At the New York meeting in 2016, Ms. Redstone, president of
National Amusements Inc., which controls about 80% of the voting
stock of CBS and its sister media company Viacom Inc., told Mr.
Stephenson she wasn't interested in a deal, the people said.
Ms. Redstone didn't inform the CBS board or its chairman and
chief executive, Leslie Moonves, of Mr. Stephenson's approach,
people close to CBS say.
Mr. Moonves learned of AT&T's interest a few weeks later
from Mr. Stephenson after AT&T made its bid for Time Warner,
people familiar with the discussion said. Mr. Moonves was upset Ms.
Redstone had kept him out of the loop, the people said.
In a statement, Ms. Redstone's spokeswoman acknowledged that Ms.
Redstone and Mr. Stephenson had a "brief introductory meeting" in
2016, but denied there was any expression of interest from Mr.
Stephenson.
"Their discussion focused on changes in the media industry and
how the two might work together in the future," Ms. Redstone's
spokeswoman said. "Ms. Redstone does not recall any conversation
regarding the potential sale of either CBS or Viacom. However, as
NAI stated publicly in 2016 -- and as is its right as a shareholder
-- it had no interest in selling its controlling stake in either
company at that time."
CBS has resisted Ms. Redstone's efforts to recombine the company
with Viacom for almost two years, and now CBS and National
Amusements are in a legal battle over control of the entertainment
company.
One of CBS's arguments is that Ms. Redstone has passed on
opportunities to pursue potential deals that could be beneficial to
CBS shareholders.
Last year Verizon Communications Inc. made multiple approaches
about a possible CBS deal and was told by Ms. Redstone that she
wanted to put CBS and Viacom together before considering any
offers, The Wall Street Journal reported.
National Amusements disclosed the approach by Verizon in a legal
filing and affirmed it wasn't interested in giving up control of
either CBS or Viacom. The filing didn't mention any takeover
interest from AT&T.
AT&T closed its $81 billion Time Warner takeover earlier
this month, making it among the most indebted corporate bond
issuers in the world. The debt burden means the company will be
busy paying down its obligations and supporting its dividend,
though Mr. Stephenson still considers some CBS assets attractive,
people close to both companies said.
The initial CBS approach in 2016 was part of AT&T's broader
review of media assets as it was contemplating possible deals; its
main interest quickly became Time Warner, people familiar with the
company said.
Testifying in April in the antitrust case the Justice Department
brought against the AT&T-Time Warner deal, Mr. Stephenson said
the telecom giant eyed large-scale opportunities, but found "a lot
of the companies in the media industry...have large family
ownership and they're very difficult to get a transaction done
with. Some of them just were not for sale."
For years, Wall Street considered CBS and Time Warner natural
merger partners -- putting them together would unite CBS's
broadcast network with a prominent set of cable networks. Acquiring
CBS would give AT&T a collection of media assets very similar
to Comcast Corp.'s NBCUniversal.
CBS is attempting to break free of National Amusements' control
and chart its own course. Last month, the company said it approved
a dividend that, if successful, would dilute National Amusements'
voting power to about 20%. But before the board acted on that
measure, National Amusements had amended the bylaws to require 90%
of directors to support such a move. The vote didn't meet that
threshold.
Now a Delaware court will decide that battle. A trial is set for
October. The AT&T approach could become a topic as the two
sides joust.
"In the normal course of practice, directors who receive
credible takeover inquiries or proposals report those inquiries to
the board," said Joseph Grundfest, a Stanford Law School professor
who specializes in corporate governance. "Even if you control the
board, you can't act like the board doesn't exist," he added.
Jeff Sonnenfeld, a professor at the Yale School of Management,
said Ms. Restone's role on the board is to "represent the entirety
of the board" and if there was an AT&T interest in acquiring
CBS "she had a duty to share that information with the full
board."
However, another governance expert said since Ms. Redstone is
the controlling shareholder, it is she who decides what is a viable
inquiry and "if she doesn't want to do it, it doesn't get
done."
--Keach Hagey contributed to this article.
(END) Dow Jones Newswires
June 24, 2018 07:14 ET (11:14 GMT)
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