QVC steps up bid for Paramount All-cash offer to be made directly to shareholders

October 22, 1993|By New York Times News Service

NEW YORK -- The fight for Paramount Communications became hostile yesterday as QVC Network Inc. decided to bypass the Paramount board and take its offer directly to shareholders.

Furious over the Paramount board's slowness to negotiate a merger through a previous $9.5 billion offer, QVC said it would offer Paramount's stockholders an $80-a-share, all-cash deal for 51 percent of the company. The rest of the company would be purchased with shares of QVC stock.

The move, known on Wall Street as a tender offer, is a takeover action that elevates the Paramount bidding to a new level of acrimony between QVC's chairman, Barry Diller, and Paramount's chairman, Martin S. Davis, who have been feuding for years.

And it injects new urgency into the competition between QVC and its rival bidder, Viacom Inc. In recent weeks, some of the biggest companies in the entertainment and communications industries have joined the battle, pledging hundreds of millions of dollars to one side or the other's war chest.

Paramount, a media-and-entertainment empire that includes the last major independent film studio in America, publishing companies and the New York Knicks and New York Rangers professional sports teams, has suddenly emerged as a coveted jewel as the communications industry scrambles to find programming for the "information superhighway" of the near future.

QVC is a home-shopping channel that is run by Mr. Diller, who once worked for Mr. Davis at Paramount. With yesterday's move, Mr. Diller has abandoned any pretense that he and Paramount's board can reach an understanding amicably.

Because QVC's $80-a-share tender offer would pay Paramount's shareholders a significant premium over the stock's value on the New York Stock Exchange, where it closed unchanged yesterday at $76 a share, it will become much harder for Paramount to resist its overtures.

And it will be harder for Viacom, Paramount's friendly suitor, to continue refusing to sweeten its own $7.5 billion offer that is not only lower but includes far less cash.

QVC's new bid includes $4.8 billion in cash, compared with the $3.5 billion cash portion in its earlier offer. Viacom's chairman, Sumner M. Redstone, has a bid on the table that includes only $1 billion in cash.

The hostile tender offer puts pressure on the Paramount board by accelerating the timetable for a response to QVC. Under Securities and Exchange Commission rules, Mr. Diller has to start his tender offer by Wednesday now that he has announced it.

And within 10 days after that, Paramount must respond with the board's recommendation to stockholders, who would be free to sell their shares to QVC regardless of the board's opinion.

Hostile takeovers are rare in the media industry, where much of the value of the target company is the management talent that the bidder alienates at its own peril. But because of Mr. Diller and Mr. Davis' well-publicized dislike for each other, the rules of the game are different this time.

Yesterday, QVC's Mr. Diller said, "In light of Viacom's refusal to improve its offer, the only actions taken by Paramount management and its board of directors have been designed to demean the value of our company."

An executive close to Paramount responded angrily, calling the tender offer "coercive" and unnecessary because it came only a day after QVC had provided documentation that the Paramount board had requested about the previous offer. "We had planned to contact them Monday or Tuesday," said the executive, who insisted on anonymity. "This is a grandstand play."

QVC also said yesterday that it would sue Viacom, Paramount and certain Paramount directors, seeking to compel fair treatment of QVC by Paramount's board and to invalidate agreements between Paramount and Viacom -- known as poison pills -- that would make it costlier for a second bidder to buy the company.

As Viacom's offer is structured, if Paramount turns its back on the deal, it must issue Viacom 24 million new shares of Paramount stock at $69.14 a share. Viacom can pay for those shares with an IOU, but a second bidder would have to pay Paramount cash for these additional shares.

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