Big Shareholder Tops Viacom Management’s Buyout Bid

The theater chain that is the largest shareholder of Viacom International on Monday offered $2.65 billion in cash and stock for the entertainment and communications concern in an effort to wrest it from a management-led buyout group.

The offer came as the latest twist in a 2-year-old Viacom takeover drama and followed months of complaints from National Amusements’ chairman Sumner M. Redstone that the management group had not offered enough for the company. Viacom owns Showtime & The Movie Channel, MTV networks, five television and eight radio stations, and syndication rights to programs such as “I Love Lucy,” “The Cosby Show” and “All in the Family.”

A subsidiary of National Amusements Inc., Arsenal Holdings, offered what it said was $44.75 a share worth of cash and preferred stock, compared to a $44 cash-and-preferred-stock offer that was accepted last October by the New York-based firm’s board of directors.

Viacom, the sixth-most active stock yesterday on the New York Stock Exchange, closed at $43.875 per share, up $2.50, in what analysts said was a sign of investor confidence that one of the suitors will consummate the acquisition. In recent weeks, some investors had lost confidence in the management group’s plans because of delays, weakness in the “junk bond” market and Viacom’s subscription television business.

National Amusements said it will put up $400 million in cash and Viacom stock, and plans to raise the remaining $2.25 billion in a bank syndication led by Bank of America. Bank of America, which has agreed to lend $592 million, said in a letter that it is “highly confident” that it can pull together the remaining funds.

The new offer tops the management group’s price by 50 cents a share in cash, and 25 cents a share in preferred stock. Both offers would also give present shareholders a small stake in the new company.

Some Wall Street analysts, citing the marginal difference in the two offers, expressed hope that a higher bid will follow. “It’s finally getting interesting,” said Kenneth Berents, analyst with the Legg Mason Wood Walker brokerage in Baltimore.

But others, noting that the management group’s bid was its third offer, were skeptical that a higher bid will be forthcoming from that suitor. The group includes Terence A. Elkes, Viacom’s chief executive; the investment banks First Boston, Drexel Burnham Lambert, and Donaldson, Lufkin & Jenrette; the Equitable Life Assurance Society of the U.S., and others.

Viacom said it had no immediate comment on the proposal. A spokesman said the management group expected before the new offer to have completed the buyout by the end of March.

National Amusements, which already owns 19.6% of Viacom shares, addressed its offer to a committee of the Viacom board of directors that considered the management group’s earlier offers. In a letter, Redstone asked the board to reach a decision on its offer by the end of this week.

If the board rejects the new offer, National Amusements would “consider a wide range of alternatives,” Redstone said in an interview. Analysts said those presumably include a hostile takeover bid.