Viacom Hints of Plan for Wooing Paramount : Mergers: Investors hope for a higher cash offer. A report that the bidding war will be settled by an auction is denied.

The drama over Paramount Communications Inc. took a new turn Monday, as Viacom Chairman Sumner Redstone said he will make another strategic move within days and the Paramount board continued to hold QVC at bay over the issue of financing.

Redstone’s comments came as he and Paramount Chairman Martin S. Davis intensified the defense of their friendly deal against QVC’s challenge. “In the next 72 hours, we expect some of our plans to become evident,” the Viacom chief said. He refused to elaborate.

Redstone has steadfastly refused to discuss any sweetening of his bid, but investors hoped he would raise Viacom’s offer, because the amount of cash committed is much smaller than QVC’s. At Monday’s close, QVC’s bid exceeded Viacom’s by $1.9 billion.

Although the Paramount directors met for several hours over the QVC bid--they adjourned after lunch--the company offered little in the way of a response. In a terse statement, Paramount said it will “consider the QVC proposal when there is satisfactory evidence of financing.”

QVC plans to respond later this week with proof that it has lined up banks willing to lend about $2.6 billion for the takeover bid, one source said.

Publicly, QVC responded with a statement saying, “QVC’s proposal to Paramount Communications continues to be far superior to the Viacom offer, and we are confident that ultimately the best interests of Paramount shareholders will be served.”

Paramount directors apparently have not yet set a date for weighing the offer. But on Wall Street, traders insisted that the Paramount board was inching closer to an auction. “They’re going to make QVC pay some money for commitment fees to the banks, and then, we believe, they’ll open it up to an auction process and the company will be sold to the highest bidder,” said Eric Rosenfeld, director of Oppenheimer & Co.’s arbitrage department.

Paramount shares rose $2 to $77.625 on the New York Stock Exchange, as traders reacted jubilantly to a Wall Street Journal story that quoted an unidentified Paramount adviser as saying the company will be “in an auction mode” within days.

Davis vehemently denied that Monday evening, saying, “That is not an authorized statement and it does not reflect our position, and I don’t believe any of our people said it.”

Davis insisted that no wedge has been driven between himself and Redstone.

“We have a signed merger agreement with Viacom, and it is the best strategic fit for this company,” Davis said. “It provides the greatest long-term growth potential for our shareholders. We are proceeding with the Viacom transaction. We believe in it; we are committed to it.”

He added: “Consistent with our legal obligations, we will consider the QVC offer if and when we have satisfactory evidence of financing. If we ever get into discussions with QVC, we will have other business concerns that go beyond the threshold issue of financing. In any case, we will conduct ourselves in a thoughtful, responsible, deliberate way.”

Paramount’s directors are expected to debate the value of QVC shares, which have doubled in price due largely to Wall Street’s excited response to new Chairman Barry Diller. The 51-year-old executive has laid out ambitious plans for the shopping network and has the backing of Comcast Corp. and Liberty Media Corp., two shareholders backing the bid for Paramount with an additional $1 billion.

To present its financing to Paramount, QVC must demonstrate that it has lined up bank commitments. QVC is sorting offers from lenders to get the cheapest rates and expects to pay less than $10 million in commitment fees, one source said, although industry predictions are that such fees could exceed $15 million.

QVC stock fell $1.125 to $59 a share in Nasdaq trading; Viacom Class A (voting) shares jumped $1.625 to close at $62.50. Viacom B shares rose $1.125 to $57.25 on the American Stock Exchange.

On Monday, Viacom announced that it has lined up its own financing for the merger proposal. It named the Bank of New York, Citibank N.A. and Morgan Guaranty Trust Company of New York as managing agents of the credit facility. Sources noted that Viacom has made an effort to secure some of the lead banks’ services on an exclusive basis, to thwart Diller or any other would-be rival.

Viacom and Paramount have moved swiftly to file documents with regulatory agencies, and some sources have suggested that the companies may file their proxy statement by week’s end. Still, at least two months or more may elapse before the proposed merger can be put to a shareholder vote.

Meanwhile, the stock of both Viacom and QVC could fluctuate dramatically and affect the value of the stock-and-cash deals proposed by both companies. At this point, neither company has placed a “collar” on the stock component of its offer, which would tell Paramount shareholders the absolute minimum value they might expect.

The battle for Paramount has rekindled the spirits of Wall Street speculators, who haven’t seen a major brawl over a media company since Paramount tried to break up the merger of Time Inc. and Warner Communications Inc. in 1989.

In the Time-Warner battle, the original stock swap was scuttled in favor of Time’s paying cash for Warner--a turnabout not expected to be repeated with Paramount.

Redstone, who currently owns about 75% of Viacom, has always vowed that he would remain the controlling shareholder of any merged company. Viacom’s merger deal with Paramount would grant Redstone nearly 70% of the voting stock, although his actual ownership stake would be cut in half.

Bidding for Paramount

Viacom Inc. and QVC Network Inc. are both offering shares of their stock, combined with cash, to buy all the shares of Paramount Communications Inc. These offers fluctuate, based on the value of Viacom and QVC stock on the market. Since its offer Sept. 12, the value of Viacom’s bid has dropped below the amount Paramount shareholders could get if they sold their stock on the market. QVC’s offer, made on Sept. 20, remains well above the price of Paramount shares.

Source: Standard & Poor’s; QVC; Viacom