T AT&T Inc

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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