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Viacom captures Paramount

February 16, 1994|By Ian Johnson | Ian Johnson,New York Bureau of The Sun

Blockbuster, which owns 3,500 video stores, had seen its stock trade at $35 a share in late November, but as it moved closer and closer to Viacom, its price dropped steadily. Yesterday, Blockbuster shares closed at $25.25, up 37.5 cents from Monday but still down 28 percent since late November.

The merger with Viacom would not help shareholders, because the deal values Blockbuster's stock at

only $25 a share. Thus, if Blockbuster shareholders agree to a merger with Viacom, they will be accepting a substantial drop in the value of their shares, while if they reject the deal, the stock could again appreciate in value.

"This is a major problem for the whole deal. If Viacom doesn't get Blockbuster, it can't afford to keep the big prize that it just won," said Alvin Mirman of Gruntal Global Securities in New York.

Blockbuster's chairman, H. Wayne Huizenga, can deliver the 23 percent of Blockbuster that he owns, but will have to convince about another 27 percent to side with him if the merger with Viacom is to go through. At least one major shareholder, State Street Research, which owns 3 million Blockbuster shares, has questioned whether it wants to be part of the new Blockbuster-Viacom-Paramount mega-media company.

Others downplay this risk and say that Mr. Huizenga will deliver the votes and that Mr. Redstone will make a success of the new company.

They believe that when Viacom digests Paramount, it will be one of the few companies able to provide "content" -- movies, shows, books and videos -- for new technologies that will allow consumers to call up entertainment into their home with a modified television remote control.

"In the short term this may rock Viacom, but in the long term you're talking about a very powerful company that could dominate the entertainment business for years. That's what all the fuss is about," Mr. Mirman, the analyst, said.

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