Viacom, QVC dig in for Paramount fight Bidding war heats up as stocks rise

September 23, 1993|By New York Times News Service

NEW YORK -- The bidding war for Paramount Communications Inc. intensified yesterday, as the contestants dug in their heels.

Spurning telephone companies' offers to aid its bid, Viacom Inc. said yesterday that it preferred to go it alone in pursuing the deal it reached to acquire Paramount last week.

In an interview, Frank J. Biondi Jr., Viacom's chief executive and president, said his company was not looking for partners that could help it sweeten its bid, which is now valued at $7.4 billion. Viacom is still planning to complete the deal "on its own balance sheet," he said.

Reports have circulated all week that Viacom was talking with some regional Bell companies that might provide part of the cash it would need to top a bid, now valued at nearly $9.9 billion, made Monday by QVC Network Inc., a home shopping service.

Mr. Biondi did not deny that the talks took place, but said they primarily concerned cable television alliances having nothing to do with Paramount.

Mr. Biondi declined to identify which telephone companies he had talked to; the only name mentioned in the rumors was Southwestern Bell.

Traders widely expect Viacom to come back with a higher offer, perhaps before Monday, when Paramount has a board meeting.

Paramount's board does not believe it has any duty to respond to the higher QVC offer because it has a binding agreement with Viacom, according to an investment banker involved in the deal who insisted on anonymity.

Sumner M. Redstone, Viacom's chairman, and Martin S. Davis, Paramount's chairman, are scheduled to pay joint courtesy calls on government agencies today in Washington. They plan to discuss the deal they reached and to make the argument that a QVC purchase of Paramount would raise serious antitrust issues by increasing the power of John C. Malone, the head of Tele-Communications Inc., the largest cable system operator in the country. Mr. Malone has a considerable interest in seeing the QVC bid prevail because he is a controlling shareholder in QVC.

One factor that may have emboldened Viacom was a jump in its stock price yesterday. The stock increase bolsters its bid, which would be paid for largely in Viacom shares. The Class A Viacom shares closed yesterday at $58.875 each, up $2.125, and the Class B stock closed at $53.375, up $2.50, on the American Stock Exchange.

Viacom's disdain for debt

Wall Street was apparently reassured by published reports that Mr. Redstone would not heavily overpay for Paramount and also by the fact that Viacom could walk away from the deal with more than $350 million in profits.

"The stock responded to reassurances from the company that )) Sumner would not make a reckless bid including too much debt," said Ed Antoian, a portfolio manager at Delaware Management Co. who has long known Mr. Redstone. "Sumner himself does not like debt. He took a lot when he bought Viacom, but he hated every minute of it."

Mr. Antoian added, "Keep in mind he is playing with his own money."

The Turner Broadcasting System removed itself from any possible role in the bidding war yesterday. In a telephone interview, Chairman Ted Turner said he was pulling back and planned to leave New York, where he has been in talks with investment bankers. He checked out of the Waldorf-Astoria Hotel, where he and others involved in the Paramount situation have been staying, and was to return to Atlanta last night.

Asked whether pressure from cable operators on his board, like Mr.Malone, had been a factor, Mr. Turner declined to comment. At one time, however, there had been a distinct possibility that Mr. Turner would link forces with the QVC bid. Subsequently, he investigated making a bid of his own.

After strong trading yesterday in QVC stock, the QVC bid remained by far the most attractive package financially. Its stock rose 6.9 percent, confounding traders who expected a decline as a reaction to the large stock component in the QVC bid. QVC closed at $60 a share, up $3.875, in Nasdaq trading.

Traders were at a loss to explain the stock's strength, and offered competing theories.

One school of thought holds that the stock's strength reflects a sentiment that QVC will win the bidding war. These traders and bankers say that QVC would make a better merger partner than Viacom because of the relative youth of its top management, and, therefore, its stock deserves a premium.

Mr. Redstone, Viacom's chairman, is an energetic entrepreneur with extensive holdings, but he is 70 years old. His second-in-command, Mr. Biondi, is well regarded but lacks Mr. Redstone's experience. Barry Diller of QVC is 51.

QVC triumph doubted

Another school of thought views the run-up in QVC stock as a sign of widespread disbelief that QVC will prevail. A victory by QVC would require it to issue 105 million shares as part of its bid, diluting its existing shares and depressing their price. If QVC is not expected to win, the market will assume that none of that will happen, and the stock will be free to rebound.

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