Paramount Documents Show It Tried to Deceive FCC, Time Says

Time Inc. on Thursday released court documents that it said showed that Paramount Communications has misled the Federal Communications Commission and shareholders about how long its hostile takeover bid for Time would take to complete.

The documents also showed, according to Time, that Paramount has considered selling off big chunks of the video and publishing company if its $12.2-billion hostile takeover plan succeeds.

In response, a Paramount spokesman insisted that the company expects to complete the takeover before the end of October and denied that it has any plans to sell off Time assets. Release of the documents was part of Time’s “vicious attempt” to slow down the transfer of cable licenses, the spokesman said.

Time has rebuffed the hostile bid that Paramount made one month ago and, in a defensive move, has offered $14 billion to buy Warner Communications.

Citibank Memorandum Cited

Time said Paramount has cited the approaching expiration of its tender offer for Time in asking the FCC to quickly approve creation of a special voting trust designed to help Paramount take control of Time’s cable licenses. Paramount on Wednesday extended the expiration of its tender offer to July 28 from July 7.

But contrary to Paramount’s statements to the FCC, Paramount officials privately believe that it may take nearly a year for local officials to approve the transfer of cable licenses to Paramount, Time maintained.

Time cited depositions and internal Paramount documents showing that senior Paramount officials and the company’s bankers believe that completion of the tender offer would be held up for many months by the need to obtain the transfer of Time’s 767 local cable licenses. Among other documents, Time cited an internal memorandum from Citibank, Paramount’s lead commercial banker, indicating that bank officials believed the tender offer would not close until between March and April of next year.

‘Acted to Deceive Agency’

The documents were obtained by Time as part of its legal battle with Paramount in the Delaware courts.

The court papers “indicate strongly that Paramount has made misrepresentations, misstatements and otherwise acted to deceive this agency with respect to critical facts,” Time attorney Philip L. Verveer wrote the FCC.

Time maintained that Paramount’s statements have also misled Time shareholders, who would presumably find Paramount’s $200-a-share bid less attractive if they were forced to wait until next spring to get paid for their stock.

Time also released an internal memorandum drafted last month by Paramount’s investment banker, Morgan Stanley & Co., that Time said showed that Paramount has considered selling assets to raise $6.2 billion to help pay for its bid.

The memo also indicates that the banker was estimating after-tax proceeds of about $2.66 billion from sale of Associates, Paramount’s big consumer finance arm.

A Paramount spokesman said the memo spelled out only “one of a number of possible (financing) scenarios.” Now, however, the company has no plans to sell assets, the spokesman said, noting that the syndicate of banks providing loans for the proposed takeover has not required Paramount to pledge that it will sell assets to reduce its debt.

In composite trading on the New York Stock Exchange, Time shares closed Thursday at $155.625, up 37.5 cents. Paramount shares dropped $1.50 to $57.875, off $1.50, while Warner closed at $61.75, up 75 cents.