Viacom Tries Ploy to Dilute Icahn’s Stake
Viacom International on Wednesday sought the Securities and Exchange Commission’s permission to issue 7.475 million new shares of its common stock in a move that would dilute the 17% stake reportedly held by investor Carl C. Icahn.
The new issue would increase the number of outstanding Viacom shares by 18% and would grant an equal number of warrants to those who purchase the units. The warrants could be exercised for another 7.475 million new shares up to 21 months after the units are sold.
Although Viacom has been expected to make an offering to raise additional equity, due to a recent acquisition spree, the offering might serve as a weapon in Viacom’s arsenal to repel an unwanted investor.
In addition to the equity offering, Viacom said it will offer up to $250 million in senior subordinated notes due in 1996. Included in the debt offering are a number of provisions that make an unfriendly acquisition much more difficult, according to one well-placed source.
As a result, Viacom appears to be calling Icahn’s bluff. He might rush to make a tender offer before the offering clears the SEC, one investment community source said, noting that Viacom expects the agency review to require just 48 hours. “I think it’s going to force (Icahn’s) hand if he is planning to make a tender offer,” the executive said.
Viacom said it wouldn’t use the proceeds to purchase Icahn’s stake unless it offered the same terms to other shareholders. But it said it might privately negotiate to buy stock held by other parties.
Viacom also disclosed that it has had discussions with “unrelated third parties regarding their acquisition of Viacom securities.” If such a deal occurs, the company said, it will withdraw the registration statement before it becomes effective.
In its documents, Viacom acknowledged for the first time that it believes an Icahn-led group has accumulated 17% of its stock. The New York investor has not publicly disclosed his stake or his intentions, although SEC rules would appear to require an Icahn disclosure today.
