Icahn Mulls $1.5-Billion Bid for Viacom : Financier Leaves Options Open as Entertainment Firm Builds Defenses

Confirming that it holds about 17% of Viacom International’s stock, an investor group led by Carl C. Icahn said Thursday that it would be willing to pay $75 per share, or $1.5 billion, for the entire company but has “not received any encouragement” from Viacom’s management.

The Icahn group stopped short of actually launching a takeover bid for the New York firm, however, and said in a filing with the Securities and Exchange Commission that it has also talked to Viacom about a truce. If no merger or other deal is reached, Icahn said his group would consider seeking control but also might sell its stake.

The disclosures did not excite Wall Street, where trading in Viacom shares closed at $65.50, up just 50 cents, on a New York Stock Exchange volume of 677,500.

“I don’t think the market believes (Icahn’s desire for a takeover) is for real,” one portfolio manager said. “A lot of arbitrageurs (stock speculators) just don’t believe he’s a player.” The executive noted that Icahn may already have his hands full with loss-plagued Trans World Airlines, which he recently acquired control of.

Some investment community sources contend that Icahn must move swiftly--possibly by today--if he wants to bid for the shares of Viacom that he doesn’t already own, before the entertainment company is encumbered by a new debt offering that contains restrictive covenants limiting additional debt and the sale of assets. Those restrictions would make it difficult for a corporate raider to increase Viacom’s debt sufficiently to pay for a takeover.

The registration statement for the $250-million debt offering and 7.475 million units of stock and warrants was filed late Wednesday. The SEC’s review of the document might take no more than 48 hours.

The offering would increase the number of Viacom’s outstanding shares by 18%, thereby diluting Icahn’s stake. An equal number of warrants would also be issued, which could be exercised up to 21 months after the offering.

As an added defense, Viacom said the exercise price of the warrants will drop 25% if a change of control occurs at Viacom. The company’s registration statement concedes that might “have the effect of delaying or preventing certain changes in control . . . and thereby depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices.”

Although most industry analysts have estimated Viacom value per share at $80 to $100 if its assets were sold separately, one investment banker said Thursday that Icahn’s proposed price is “near the top of what you’d want to pay” if the company is kept intact.

Another executive familiar with Viacom said $75 per share “could be fair,” although the value might range up to $95 if assets were sold separately.

Viacom told the SEC that it will cancel its stock offering if it finds a third party to buy Viacom securities. The company reportedly negotiated with Hallmark Cards last weekend and is believed to have approached National Amusements Inc., a Dedham, Mass.-based motion picture exhibitor controlled by Sumner Redstone, and Shamrock Holdings, the Burbank company owned by the Roy E. Disney family.

In its registration statement, Viacom spelled out a sequence of events concerning Icahn, saying that the investor first approached its investment banker, First Boston Corp., on or about April 29 to discuss his “position” in the company and various “alternatives.”

Viacom told Icahn that it would not buy his stake--less than 5% at that time--but it began looking for a purchaser for his shares. It also delayed the stock-and-debt offering while it did so. Viacom disclosed that after Icahn raised his stake to 17%, it did discuss with him last Tuesday the possibility of buying his shares, but the “discussions were inconclusive.”

According to the Icahn filing, he has discussed the possibility of entering into a “standstill” agreement with the company if he can exchange his Viacom stake for a combination of Viacom securities “and/or cash and a joint venture” between himself and Viacom to make acquisitions of other companies in the entertainment field.

A Viacom spokesman declined to comment on any aspect of the Icahn filing, and Icahn himself could not be reached for comment.

Viacom is the nation’s 11th-largest cable-TV system operator and operates eight cable-TV programming services as well as four TV stations, eight radio stations and a TV-programming distribution company.

VIACOM INTERNATIONAL AT A GLANCE

Millions of dollars Year ended 1985 1984 1983 Revenue $444.1 $320.4 $315.6 Net income 37.05 30.6 28.3

Assets (1985): $1.6 billion Employees: 3,900 Common shares outstanding: 20.6 million 12-month stock price range: $73.75-$41.87 1/2 Thursday’s close (NYSE): $65.50