Paramount seeks more data from QVC Moves gives Viacom time to sweeten bid

September 28, 1993|By New York Times News Service

Martin S. Davis, the chairman of Paramount Communications, averted a potential rift with his board yesterday when he persuaded it to stall before negotiating a merger with QVC Network Inc. His aim was to give Viacom Inc., his hand-picked merger partner, a chance to come back with a sweeter offer, an executive close to the board explained.

As a result of his argument, the board opened the door yesterday to merger talks with QVC, but not until QVC proves it has the financing in place for its potential purchase.

In a tersely worded statement, Paramount said the board "met today and took no action on the QVC proposal."

"Paramount will consider the QVC proposal when there is satisfactory evidence of financing," the statement said.

Viacom had agreed to buy Paramount two weeks ago in a deal now valued at $7.89 billion. A week later, QVC, the home shopping company, made a rival bid, now worth $9.8 billion.

Despite the gap, Mr. Davis has been reluctant to sell the company he has run for 10 years to QVC, which is controlled by Barry Diller, who worked for Mr. Davis at Paramount and who went on to great success in the television business.

The two men intensely dislike each other. Some media executives say that Mr. Davis' fears of Mr. Diller drove him into the arms of Viacom's chairman, Sumner Redstone.

Paramount's board was advised by the company's bankers and lawyers yesterday that it could begin discussions with QVC about its offer. Until yesterday, there had been some question about whether the board had the legal right to do so, given the merger agreement signed by Viacom. That document prohibits Paramount from engaging in merger talks with anyone who puts forth a bid with "material contingencies."

In a five-hour board session, characterized as "difficult" by two executives close to the discussions, Mr. Davis successfully challenged that notion. He argued that the board ought to move slowly and require QVC to provide more proof, in case it is sued by a spurned Mr. Redstone.

The board was not immediately convinced, according to one executive close to the board. James A. Pattison, a Canadian entrepreneur, backed Mr. Davis, while J. Hugh Liedtke, the chairman of Pennzoil, resisted.

Mr. Davis hammered away until he achieved a consensus, the executive said.

The delay had at least one potentially beneficial effect for Paramount shareholders. After a week of insisting that his contract would protect him against interlopers, Mr. Redstone said yesterday that he planned to investigate raising his bid after all.

Meanwhile, an executive close to QVC said the company would have its financing commitments within the next few days, perhaps even tomorrow.

On Wall Street, analysts and investors said the news that the board would weigh competing offers was expected. They explained that Paramount's board was moving cautiously because of the fear that it could be sued by Viacom if it missteps.

Last week, Viacom filed an antitrust suit against QVC and two companies controlled by John C. Malone, a cable television magnate. The suit charged that a QVC-Paramount merger would give him even more power in the industry.

Trying to placate Mr. Redstone and lure him into staying in the bidding, Mr. Davis issued a statement yesterday that Viacom still presents "the best strategic fit for Paramount and provides the best long-term growth for its shareholders."

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