Viacom Backs Investor Group’s 3rd Takeover Bid--$2.9 Billion

Directors of Viacom International agreed Friday to sell the diversified New York media company to a management-backed investor group in a deal valued at $2.9 billion plus a 20% ownership stake in a new corporation being formed to buy Viacom. The agreement came on the third try by the investor group to make an offer that the board of the cable-TV and entertainment company would accept.

Under the sweetened terms, the group will pay shareholders $37 a share in cash and a fraction of a share of preferred stock that the group valued at $7 per share. Viacom has nearly 54 million shares, fully diluted, making the cash-and-stock portion of the transaction worth about $2.35 billion, while the new corporation will also assume about $550 million in Viacom debt, a Viacom spokesman said.

In addition, existing Viacom shareholders will be given common stock in the new corporation representing a 20% interest in the company. Viacom did not put a value on the stock. The equity interest was the principal “sweetener” in the accepted offer, compared to the two previous versions that were rejected.

The investor group includes Viacom President and Chief Executive Terrence A. Elkes and its financial advisers--First Boston, Drexel Burnham Lambert and Donaldson, Lufkin & Jenrette Securities.

The group includes “certain other investors” whom the Viacom spokesman declined to identify.

“We believe that this transaction--which will permit shareholders to receive a highly attractive price for their shares while retaining a portion of the equity in the new company, and which will allow Viacom to continue to operate as an independent and integrated entity--is in the best interests of Viacom, its shareholders and its employees,” Elkes said.

The group’s original $40.50-per-share bid consisted of $37 a share in cash and preferred stock valued at $3.50. That was replaced by a $44-per-share bid--$35 in cash and $9 in preferred stock--which the Viacom board rejected Oct. 7.