Court Deals Blow to Paramount’s Bid for Time
A judge dealt a potentially fatal blow today to Paramount Communications Inc.'s $12.2-billion hostile bid for Time Inc. by allowing Time to proceed with its own $14-billion tender offer for Warner Communications Inc.
Delaware Chancery Court Judge William T. Allen denied Paramount’s request for an injunction against Time’s $70-a-share tender offer, which is scheduled to expire at midnight Monday.
Paramount said it was seeking an immediate stay of Allen’s ruling while it appeals his decision to the Delaware Supreme Court. The judge scheduled a hearing this afternoon in Wilmington to hear further motions.
If Paramount loses its case before the state’s highest court and Time and Warner complete their merger, Paramount is not expected to pursue a buyout of Time Warner Inc.
“We are delighted about the chancellor’s decision,” Time said in a statement. “It is a very big step toward making Time Warner Inc. a reality.”
In a 79-page decision, Allen said he had “concluded that plaintiffs have not shown a reasonable probability that they possess a right in these circumstances to require the (Time) board to abandon or delay the long-planned Warner transaction.”
The judge’s decision appeared to support Time’s contention that the proposed merger with Warner was the culmination of two years’ negotiations and, as such, represented a long-term business decision.
Paramount and some of Time’s shareholders who were also plaintiffs in the case contended that Time’s board effectively put the company up for sale in March when the directors agreed to the merger with Warner. As such, they claim, Time should be forced to seek the highest value for its shares.
Under the tender offer for Warner, Time will pay $70 a share in cash for half of Warner’s 200 million outstanding shares. Time will later exchange $70 in cash and securities for each of the remaining shares.
After New York Stock Exchange trading resumed in the stock of all three companies following a one-hour halt preceding Allen’s ruling, Time shares plunged by as much as $12 a share as investors began unloading their stock.
Before the decision was announced, Time stock had already sank $8.62 1/2 a share to $141.37 1/2 by midday on the New York Stock Exchange today. Wall Street had expected the judge to rule in favor of Time, and the company’s stock dropped in recent sessions as traders sold to take their profits.
Brian Warner, a media analyst at Integrated Resources Asset Management, said despite Paramount’s intention to appeal, its chances for success are slim.
“I don’t think it will work,” he said. “There wasn’t an overwhelming case to be made either way” in the original suit.