A Temporary Cease-Fire in CBS’s Fight With Redstones: DealBook Briefing

Here are some of the notable parts of the filing by lawyers for National Amusements: • On CBS’s contention that Ms. Redstone intends to replace its board because of...


Here are some of the notable parts of the filing by lawyers for National Amusements:

• On CBS’s contention that Ms. Redstone intends to replace its board because of its resistance to a deal: “N.A.I. does not have, and has never had, any intention of replacing the CBS board or taking other action to force a merger.”

• Why Delaware’s Court of Chancery should reject a CBS board move to dilute the Redstones’ voting power to 17 percent from 79 percent: “This is an unprecedented usurpation of a controlling stockholder’s voting power.” Later, Ms. Redstone’s lawyers add, “This court has held that, absent a compelling justification (which is non-existent here), a board of directors breaches its fiduciary duty of loyalty by acting for the primary purpose of diluting a controlling stockholder’s voting rights.”

• The revelation of which CBS director National Amusements had suggested was involved in questionable activity. The filing includes an affidavit by Robert Klieger, a CBS board member and lawyer for the Redstones (whom other directors have argued is working on behalf of Ms. Redstone), regarding a call he had had last week with Bruce Gordon, the head of the CBS board’s special committee:

Specifically, I noted National Amusement Inc.’s discomfort with the continued CBS board position of Charles K. Gifford given certain incidents that took place in 2016 and 2017. I also discussed the possibility of facilitating Mr. Gifford’s exit from the CBS board with minimal disruption and public attention, including, in the event of a merger of CBS and Viacom, through his potential non-appointment to the board of a combined company.

• A lament for what Ms. Redstone is her current predicament:

“Plaintiffs have forced CBS’s controlling stockholder into a position of having to make a Hobson’s choice—of either accepting massive dilution of its voting power (thereby losing control of the company and suffering the economic detriment to its stake that entails), or acting as a stockholder to prevent such dilution and protect its voting power, knowing that doing so might trigger the departure of (and payment of massive parachute payments to) key management and directors of the company.

CBS filed a response to National Amusements saying that Ms. Redstone’s opposition to the special meeting is proof that CBS need a temporary restraining order.

“Unless restrained, defendants will use the consent process to replace directors or amend bylaws in advance of Thursday’s board meeting.”

The context

The broadcaster’s case in Delaware’s Court of Chancery against its corporate parent, the Redstones’ National Amusements, is one of a number recently that challenge the kind of dual-class stock system used by the Redstones (and indeed by The New York Times Company).

Another part of CBS’s argument — that Ms. Redstone warned Verizon off bidding for CBS — took a hit yesterday. Verizon’s C.E.O., Lowell McAdam, told CNBC he didn’t want to invest in “linear TV.” (Read: CBS or 21st Century Fox.)

Speaking of Fox: An all-cash bid by Comcast for its assets could pit Rupert Murdoch, who would pay less tax on Disney’s share-based offer, against fellow shareholders. And in the middle of all this, Fox’s TV chiefs are in contract talks.

Elsewhere in deals: PaddyPower is reportedly close to buying FanDuel after the Supreme Court legalized sports betting. The hedge-fund mogul David Tepper signed a deal to buy the N.F.L.’s Carolina Panthers for $2.2 billion. FIFA is reportedly preparing a vote on the $25 billion offer by SoftBank and others for two new soccer tournaments. The two big proxy advisory firms urged Hyundai shareholders to side with Elliott Management against the management’s restructuring plan.

— Michael de la Merced

Senate Democrats win vote on net neutrality

Senate Democrats narrowly won a vote on Wednesday to save so-called net neutrality rules.

Cecilia Kang of the NYT reports:

The Senate passed a resolution in a 52-47 vote to overturn a decision last December by the Federal Communications Commission to dismantle Obama-era rules that prevented broadband providers like Verizon and Comcast from blocking or speeding up streams and downloads of web content in exchange for extra fees. The commission’s repeal of net neutrality is set to take effect in a few weeks.

The rare victory for Democrats is sure to be short-lived, with a similar resolution expected to die in the House, where Republicans have a larger majority. Only three Republican senators voted in support of the resolution.

But that’s beyond the point. The effort to stop the repeal of net neutrality rules is part of a broader political strategy by Democrats to rally young voters in the November elections.

Silicon Valley East?

The Washington Post reports:

Apple has quietly explored the idea of opening a campus for 20,000 employees in Northern Virginia, further advancing the possibility that the Washington area could evolve into an East Coast outpost for Silicon Valley.

Earlier this year Northern Virginia was one of the 20 places in the United States and Canada that made the finals to host Amazon’s second headquarters.

Mark Zuckerberg’s apology tour crosses the Atlantic

Mark Zuckerberg, Facebook’s chief executive, plans to meet with members of the European Parliament as early as next week, the latest stop in a wide-ranging apology tour over the social network’s use of people’s personal data.

His planned appearance in Brussels highlights the breadth of the international concern over how Facebook failed to prevent political consulting firm Cambridge Analytica from obtaining and using the data of many as 87 million of its users.

His visit will involve a closed-door session with leaders of the European Parliament’s various blocs and the head of the body’s civil liberties committee, which is holding hearings on Facebook’s practices, as well as a stop in Paris, where Mr. Zuckerberg is set to have lunch with French President Emmanuel Macron to discuss a range of issues.

— Prashant S. Rao and Sheera Frenkel

Amazon, Berkshire Hathaway and JPMorgan continue to search for someone to run health care venture

The health care partnership formed earlier this year by Amazon, Berkshire Hathaway and JPMorgan is struggling to find a chief executive, CNBC reports.

• Health policy and insurance experts were among the initial targets but WHAT is now exploring candidates with an entrepreneurial background in technology and health.

• The job comes with big challenges. Whoever becomes C.E.O. will have to work across three companies with 1.2 million employees and develop solutions to bring down costs in a multi-trillion dollar industry. The group will also be “free from profit-making incentives and constraints” That means whoever takes the job will have to “handle the requisite long hours, extensive travel and public scrutiny of running a high-profile start-up, but probably without the allure of a big stock incentive plan, which is typically an attractive incentive in tech recruiting.”

• At Berkshire’s annual meeting, Warren Buffett said the partnership hoped to announce a hire “within a couple of months.” But he seemed uncertain, though not unhopeful, about the effort as a whole.

“Whether we can bring the resources, bring the person, that C.E.O., is terribly important. Bring the person, support that person and somehow figure out a better way for people to continue to receive better medical care in the United States,” he mused. “We’ll see if that will happen.”

Lachlan Murdoch to head the new Fox

Lachlan Murdoch will become the chief executive officer and co-chairman of Fox, if Disney completes its deal for most of 21st Century Fox’s assets, the company announced on Wednesday.

Lachlan Murdoch currently serves as 21st Century Fox’s executive chairman. Rupert Murch will be the other chairman of the new Fox.

Not named in the announcement was James Murdoch, who is 21st Century Fox’s chief executive. Speculation has swirled about the fate of James Murdoch since reports of talks between Disney and Fox first broke last year. Early on the rumors focused on James Murdoch joining Disney as a senior executive and possibly succeeding Robert Iger, Disney’s chief executive. But last week the WSJ reported that James Murdoch is planning to strike out on his own if the Disney deal closed.

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Canada’s foreign minister, Chrystia Freeland, Mexico’s economy minister, Ildefonso Guajardo, and the U.S.’s trade representative, Bob Lighthizer.

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Edgard Garrido/Reuters

How Nafta and Iran trade talks got bogged down

As the Trump administration wages multiple trade battles, it has met several big hurdles. Negotiators on Nafta appear unlikely to hit an informal deadline that would let Congress approve a rewritten pact this year, the WSJ says. The timing isn’t set in stone, but further delays make a new Nafta less likely before elections in Mexico and the U.S.

At the same time, Europe has pledged to protect its companies from potential U.S. sanctions on Iran. The E.U.’s foreign policy chief, Federica Mogherini, said the goal was “maintaining and deepening economic relations with Iran.” (She may be emboldened by President Trump’s about-face on ZTE — more on that later.)

Even Boeing’s victory at the World Trade Organization — which ruled that Europe had illegally subsidized Airbus — could pose problems. U.S. penalties could further strain trans-Atlantic relations.

close to buying FanDuel after the Supreme Court legalized sports betting. The hedge-fund mogul David Tepper signed a deal to buy the N.F.L.’s Carolina Panthers for $2.2 billion. FIFA is reportedly preparing a vote on the $25 billion offer by SoftBank and others for two new soccer tournaments. The two big proxy advisory firms urged Hyundai shareholders to side with Elliott Management against the management’s restructuring plan.

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Credit
Ng Han Guan/Associated Press

Who doesn’t like Trump’s lifeline to ZTE?

Lawmakers from both parties aren’t likely to support easing sanctions on the Chinese telecom company, even if the White House reckons it might persuade Beijing to lift import limits on American agriculture. Representative Mac Thornberry, the head of the House Armed Services Committee, told Bloomberg, “It is not a question to me of economics, it is a question of security.”

What others have said: John Harwood of CNBC said it was the president shrinking from another fight. And Lex said Mr. Trump was fighting from a position of weakness.

And the U.S. and China remain “very far apart” in trade talks, according to the U.S.’s ambassador to Beijing. Businesses are still lobbying for exemptions from Chinese tariffs, too.

The bigger picture: Is Huawei next for a reprieve?

Is ZTE a trade dispute or an enforcement action?

Top trade officials in the White House have tried to separate any discussions on ZTE from trade negotiations with China, calling it an enforcement action, not a trade dispute.

In a series of tweets on Wednesday morning, Mr. Trump seemed to contradict that point and pushed back against that narrative that he is caving to China.

The political flyaround

• The White House has eliminated the role of cybersecurity coordinator. (NYT)

• Novartis’s general counsel retired after its contract with Michael Cohen became public. Will President Trump’s latest financial disclosures reflect payments to Mr. Cohen?

• Robert Mueller was “squarely” within his rights as special counsel to indict Paul Manafort, a federal judge ruled. (Politico)

• The House is expected to vote on moves to roll back Dodd-Frank next week. Stephen Gandel of Bloomberg Opinion expects little to change, at least for the Volcker Rule.

• Preet Bharara is reportedly considering running for New York’s attorney general — as an independent. (Bloomberg)

• Mr. Trump may invoke a Cold War-era statute to keep coal and nuclear power plants online. (Bloomberg)

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Mike Bloomberg

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Krista Schlueter for The New York Times

Meet Mike Bloomberg’s answer to Davos

The New Economy Forum is designed for a world where China’s ascent looks unstoppable. So it’s in Beijing, rather than the Swiss Alps. Participants include the former Treasury secretary Hank Paulson, Henry Kissinger, Janet Yellen and Gary Cohn.

Mr. Bloomberg’s pitch in the FT:

“Davos has been around for a long time: It is a very big conference and it is focused on lots of world problems. This conference is focused on the world and China as an emerging power and how we all work together.”

Elsewhere in boldface-name endeavors: Richard Branson and Pierre Omidyar are backers of a financial instrument for nonprofit investments devised by NPX.

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The onetime headquarters of Cambridge Analytica.

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Andy Rain/EPA, via Shutterstock

Cambridge Analytica’s troubles aren’t over

The Justice Department and the F.B.I. are seeking to question the defunct firm’s former employees and banks, the NYT reports. That’s likely to keep concerns about Facebook’s privacy policies and role in the 2016 elections in the news.

Elsewhere on Facebook: The company says it deleted 583 million fake accounts, and has reportedly pushed up its content-review budget. Mark Zuckerberg is snubbing Britain’s Parliament. Some nurses at San Francisco’s general hospital want his name off the building.

Elsewhere in tech: Inside Tencent’s frenetic deal-making. Masa Son has high hopes for SoftBank’s next Vision Fund, and Japan probably should, too. Lyft joined Uber in eliminating mandatory arbitration for sexual misconduct cases. The Pentagon wants a nuclear-grade cloud.

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Charles Rex Arbogast/Associated Press

The quarterly investor holdings flyaround

• Investors’ holdings of Apple dropped by the most since the first quarter of 2008.

• Warren Buffett’s Berkshire Hathaway raised its stakes in Teva Pharmaceutical and Monsanto.

• Bill Ackman’s Pershing Square Capital Management bought nearly 2 million shares in United Technologies. (A new book criticizes several of Mr. Ackman’s big moves.)

• David Einhorn’s Greenlight Capital invested in Office Depot and Abercrombie & Fitch.

• Stanley Druckenmiller bet on Alibaba and sold out of Facebook.

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Tom Wolfe

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Bebeto Matthews/Associated Press

Remembering Tom Wolfe’s chronicles of capital

The famed author died yesterday at 88. Business was one of his big subjects, as his obituaries noted:

• On “The Bonfire of the Vanities”: “a sweeping, bitingly satirical picture of money, power, greed and vanity in New York during the shameless excesses of the 1980s.” (NYT)

• “‘The Bonfire of the Vanities’ wickedly dissected the Wall Street money-grubbing crowd who thought they were rulers of the universe. ‘A Man In Full’ did the same for the American myth of the self-made mogul, as well as, perhaps, being a disguised story of himself.” (FT)

• On “The Electric Kool-Aid Acid Test”: “one of the great chronicles of Silicon Valley culture — although it wasn’t clear that it was about Silicon Valley at the time.” (CNBC)

Revolving door

• Two Tesla energy executives, Arch Padmanabhan and Bob Rudd, have left. (Bloomberg)

• Two senior UBS bankers — Severin Brizay, its head of M. & A. for Europe, the Middle East and Africa, and Laurent Dhome, a private equity specialist — are reportedly joining Bank of America. (Bloomberg)

• The human resources start-up Namely ousted its C.E.O., Matt Straz, over unspecified misconduct claims. (Bloomberg)

The speed read

• Jay-Z finally sat down for questioning by the S.E.C. It may be getting harder to prove fraud against sophisticated investors.

• The world is borrowing more. Investors are wary of companies spending more.

• Fox settled discrimination lawsuits involving 18 current or former employees for $10 million. (NYT)

• The messaging business WeChat is reportedly considering a service for bankers in China. (FT)

• Six more states sued the maker of OxyContin, Purdue Pharma. That makes 22. (Reuters)

• How Qatar is rebuilding in the face of a blockade led by Saudi Arabia. (FT)

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