Turner Given the Nod to Bid on Paramount : Entertainment: Sources say his board has OKd a challenge to the offer by Viacom.

A bidding war for Paramount Communications Inc. grew more likely Friday as the board of Turner Broadcasting System gave the go-ahead for Chairman Ted Turner to make a rival offer for the entertainment company, knowledgeable sources said.

Turner is the second potential buyer to surface since Paramount announced a merger agreement with Viacom Inc. on Sunday. Barry Diller’s QVC Networks Inc. is also said to be weighing a bid, and may move as early as this weekend, according to sources.

Viacom has offered $8.2 billion in cash and stock for Paramount, which most Wall Street analysts expect to be topped. Paramount’s stock on Friday shot up $3.50 per share to an all-time high of $68.50 in anticipation of some action. Viacom Class A shares fell $1.125 to $59.875.

According to people close to Turner, the cable entrepreneur weighed a bid for Paramount earlier this year but was unable to come to terms with Paramount Chairman Martin S. Davis. Sources say Turner will probably wait for Diller before making his move.

Turner “doesn’t want to be the first guy through the door,” said one associate.

The Turner board’s action on Paramount comes just one month after it OKd the purchase of New Line Cinema and Castle Rock Entertainment in a combined deal valued at $750 million. There was no word Friday on how a Paramount bid would affect those acquisitions, although sources said they expect Turner to proceed.

New Line had no comment, but its stock fell $2.25 to $20.125 on Friday. At Castle Rock, Chairman Alan Horn said, “We’re fully confident our deal will go through.”

Skeptics also questioned whether Turner, who is said to be consulting with investment bank Merrill Lynch, could acquire Paramount without piling up additional debt. “He’s already highly leveraged,” said one source. “And he’d have to take on a huge amount of debt to do this.”

Any rival bidder for Paramount would face considerable resistance from Sumner Redstone, the tough-minded chairman of Viacom. Redstone would personally control about 70% of the merged Paramount Viacom International and vowed that the deal “won’t be torn apart by anybody.”

“This is not a sure thing,” cautioned one source about the expected rival offers. “Sumner still has the high ground.” Any new bid, however, would almost certainly force Redstone to up the ante.

Significantly, both Turner and Diller are said to have the support of John Malone, chief executive of Denver-based Tele-Communications Inc., the country’s largest cable TV operator.

Malone also owns 50% of Liberty Media Corp., a holding company which has stakes in two dozen cable TV networks. Liberty, Diller and Philadelphia-based cable TV operator Comcast Corp. control QVC Networks. TCI and Time Warner are also significant shareholders in TBS.

Indeed, a bid from either Diller’s QVC Networks or Turner would turn attention to the complicated web of interlocking ownership interests in the cable and entertainment industries. Such overlaps could conflict with pending concentration-of-ownership rules.

TCI’s Malone has been studying the possibility of buying a Hollywood studio for several years and could accomplish the acquisition through either Liberty, QVC Networks or Turner.

Time Warner, which is a major shareholder in TBS, is also supporting Turner’s bid, sources said. Should Turner be successful in acquiring Paramount, the sources said, Time Warner would probably swap some assets for its stock, perhaps securing CNN or other Turner entertainment cable networks.

Turner has attempted ambitious deals before, including a hostile bid for CBS Inc. in the mid-1980s.