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CBS' Moonves and Shari Redstone are 'two scorpions in a bottle' who need each other: Media critic Ken Auletta

Key Points
  • A demand letter sent last year by Moonves to Redstone is playing out in the boardroom battle, says the New Yorker columnist.
  • The issues stem from Redstone's efforts to try to reunite CBS with Viacom on terms rejected by Moonves.
  • "You're talking about a 'married couple,' a forced 'marriage,' and they sleep in separate bedrooms," Auletta says.
The battle between Moonves and Redstone is like having two scorpions in a bottle, says Ken Auletta

A demand letter sent last year by CBS chief Les Moonves to controlling shareholder Shari Redstone is playing out in the boardroom battle for control of the media giant, best-selling author Ken Auletta told CNBC on Friday.

"You have two scorpions in a bottle here. And each of them have the ability to kill each other. But they don't want to," said Auletta. His upcoming book, "Frenemies: The Epic Disruption of the Ad Business (and Everything Else)," details the Moonves letter to Redstone regarding her plan to merge CBS with its sibling company Viacom.

In a "Squawk Box" interview, Auletta said Moonves made nine demands in the 2016 letter to Redstone.

"Basically, it was we want to control the board. We want to appoint the board, independent directors," Auletta said. "Only Moonves could be relieved of his job by the independent directors, which he appointed. And Shari Redstone, though basically she had 80 percent voting control, would not have control. Exactly what played out here."

At issue: Redstone wants to CBS to merge with Viacom, with Moonves to lead the combined company and with Viacom CEO Bob Bakish as his No. 2. Moonves doesn't want Bakish looking over his shoulder.

On Thursday, the CBS board approved a special dividend that would cut the Redstone family's voting power to about 20 percent from 80 percent. However, the move cannot take effect unless it can overcome Redstone legal challenges.

National Amusements, the privately held movie theater company owned by 94-year-old Sumner Redstone and his daughter, Shari, holds a majority of the voting shares in CBS and Viacom. The two media companies had been under the same umbrella from 2000 to 2006 before they were split into separate publicly traded companies.

Leslie Moonves, Chairman and CEO of CBS Corporation (l) and Shari Redstone Vice Chairperson of Viacom.
CNBC | Getty Images

"Les Moonves is a guy who's really felt like he hasn't had a boss. He's arguably the most successful television executive in modern times. Fourteen out of 15 years [CBS was] No. 1 in primetime. They make more money today than they did 10 years ago," Auletta told CNBC. "He does not want to merge with Viacom."

"[Redstone] believes Moonves could help save Viacom. She believes the combination in size would help save Viacom," said Auletta. He said she sees it as "one plus one would equal three with him in charge."

Auletta said Moonves wants to stay but he and Redstone haven't figured out how to live with each other. "You're talking about a 'married couple,' a forced 'marriage,' and they sleep in separate bedrooms," Auletta said.

The part of the problem, as Auletta sees it, is Redstone "is not someone who's used to dealing with talent." Neither was her father, he added.

"[Moonves] wears a suit but he's not a 'typical suit,'" Auletta said. "He's a guy who reads the scripts, casts the people. He's engaged in the artistic side."

If Moonves were to leave, CBS stock would decline, Auletta said. "If he's going to leave, he wants to be fired because he gets a couple hundred million dollars in severance, which he wouldn't get if he just quit."

The CBS board said in a statement: "If consummated, the dividend would enable to company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives."

National Amusements said in a statement: CBS management can't "wish away the reality that CBS has a controlling shareholder."