Investor Group May Make Another Bid : Viacom Board Rejects Sweetened Offer
Directors of Viacom International have rejected a management-backed investor group’s sweetened offer to buy the company for $2.9 billion, raising expectations on Wall Street that the investor group would soon make a higher bid.
In a terse announcement, the New York communications concern said the leveraged buyout offer was turned down by a special committee of outside directors, adding that the company will now “evaluate alternatives available to it.” A spokesman declined to elaborate on what those alternatives might be or the reasons the bid was declined.
The rejected offer was a $44-a-share bid that had supplanted--without a public announcement--the investor group’s initial $40.50-a-share offer. The sweetened offer consisted of $35 a share in cash and a fraction of a share of preferred stock said by the group to have a market value of $9 a share.
The original bid consisted of $37 a share cash, plus preferred stock valued at $3.50. But many analysts of the company, which holds valuable cable, broadcast and programming properties, believe that Viacom is worth more than the second offer, and many quickly predicted a higher bid would soon emerge.
“These are not financial illiterates, and they’ve been trying to get the company at the best price they could,” said Neil R. Feldman, vice president at Argus Research in Manhattan. He added that he now expects the investor group to make a higher offer or an offer that includes a higher proportion of cash.
Reflecting that expectation, the market bid Viacom stock up $1 to $43.75 on heavy trading of 4.14 million shares. About 34.2 million common Viacom shares are outstanding.
Meanwhile, one of Viacom’s largest shareholders sold most of its stake to another large stakeholder.
Augustus K. Oliver, managing partner in the investment firm Coniston Partners, said an investor group led by Coniston on Tuesday sold 2.87 million common shares, or about 8.4% of Viacom’s common, to an investor group led by National Amusements Inc., a Dedham, Mass.-based theater chain. That transaction left the National Amusements group with about 18% of Viacom’s common shares, Oliver said, and Coniston with less than 5%.
National Amusements last week asked federal clearance to raise its stake to as much as 24.9% of Viacom stock. Analysts said the maneuver suggested that National Amusements might be trying to force the management-led investors to raise their bid or might be laying the groundwork for a bid of its own.
Sumner Redstone, National Amusements’ chairman, did not return phone calls seeking comment.
Viacom sells television programming, owns five television and eight radio stations and such pay-cable services as Showtime/The Movie Channel and MTV Networks, and is the 10th-largest operator of cable-television systems. Viacom holds the syndication rights to such hot properties as “The Cosby Show” and “The Honeymooners.”
Those assets have made Viacom the subject of much takeover speculation in the past year two years, and a number of analysts have estimated the value of the company’s various assets to be $45 a share to $50 a share.
Despite the keen interest in Viacom’s assets, some analysts were skeptical that other bidders would appear or that National Amusements would attempt a tender offer.
They noted that the management-led group, which includes Chief Executive Terrence A. Elkes, has lined up as members of his group several of the investment powerhouses that might be best able to raise financing for a competing proposal: First Boston, Drexel Burnham Lambert and Donaldson, Lufkin & Jenrette Securities.
The Equitable Assurance Society is another member of the group.
“Anybody who might think about making an offer would have to think seriously about who their competition would be,” said Kenneth Berents, analyst with Legg Mason Wood Walker in Baltimore.
