Paramount to Hold Talks With QVC : Mergers: Studio agrees to ‘informational’ discussions on hostile takeover bid. Some analysts are predicting an auction process.

As Barry Diller’s QVC Network Inc. continued talks with BellSouth Corp., Cox Enterprises and several other potential investors Monday, Paramount Communications Inc. finally confirmed that it will enter “informational” discussions about QVC’s hostile bid for the company.

The Paramount board appears to be under considerable pressure because QVC’s offer is valued $2 billion higher than the agreement Paramount struck with Viacom Inc. on Sept. 12. However, there was no indication how long the informational review will take.

If the process drags on, the board runs the risk of having QVC approach Paramount shareholders directly with a tender offer, which could embarrass directors charged with protecting shareholder interests. But a number of Wall Street traders say they still expect the board to open up an auction process, encouraging Viacom to sweeten its bid.

Meanwhile--although the QVC camp claims to need no additional cash--one executive acknowledged that the company is talking to “a series of players” about investing in the home shopping network. The prestigious list--headed by BellSouth--keeps the pressure on Paramount to seriously consider its offer, even though a source close to QVC said there is just a 50-50 chance that new investors will be brought in.

One well-placed executive says BellSouth initially offered $5 billion to participate as an equal partner in the Paramount bid but that talks have been scaled down to a possible BellSouth investment in QVC of under $1 billion.

BellSouth is the largest telephone holding company in the United States, providing local service to nine Southeastern states. In 1992, the Atlanta-based firm reported net income of $1.6 billion on revenue of $15.2 billion.

QVC has not ruled out a deal with Ameritech or Bell Atlantic, which have also expressed serious interest, the executive said.

Cox Enterprises--which very nearly committed up to $600 million to Viacom two weeks ago--is another candidate, while still another unidentified investor is said to be engaged in talks.

Despite its earlier discussions with Viacom, some industry executives speculated Monday that Cox might feel more comfortable investing in QVC because of its prior working relationship with Comcast Corp. and Tele-Communications Inc., QVC’s two biggest backers. Cox last year invested alongside Comcast and TCI in Teleport, the country’s leading alternate-access provider. And Cox, as well as TCI, is a shareholder in the Discovery network.

Viacom, on the other hand, has alienated much of the cable TV industry because of two antitrust lawsuits that have aired problems publicly. A lawsuit against Home Box Office, the dominant pay TV firm, was settled early this year. Last month, Viacom filed an antitrust suit against QVC and TCI, the nation’s largest operator, which is headed by John C. Malone.

If Cox throws in its lot with QVC, one Hollywood executive said, it could be a case of “not wanting to be against Malone.”

Meanwhile, Viacom on Monday issued a statement ostensibly welcoming Paramount’s decision to hold informational talks with QVC.

“Paramount will now be able to address directly the many questions raised by the QVC proposal and the activities of the Malone group,” the statement said.

A QVC adviser brushed aside the idea that the review could be time-consuming, insisting that Paramount’s advisers could give an opinion by the end of the week.

In September, the Paramount board balked at considering QVC’s unsolicited bid, even though it included a cash component of $30 a share--more than triple the amount of cash Viacom offered. Paramount’s board required QVC to submit evidence of financing, and QVC disclosed $4 billion in commitments.

Bell Atlantic is one of the Baby Bells that has set its sights on expanding into cable TV. It has said it wants to buy a cable TV system, and recently has been rumored to be in talks aimed at acquiring a major cable system in the West.

Bell Atlantic, through its New Jersey Bell subsidiary, has also agreed to build and lease channel capacity to a New Jersey cable TV operator. It is also testing technology to deliver video pictures over copper telephone lines. Until now, BellSouth has not ventured into cable TV much beyond a multiple-channel experiment in Florida.

Chicago-based Ameritech, which has been in video trials in Michigan, Indiana and Illinois, wants to be a bigger player in “broad-band” networks but has been awaiting a clearer regulatory picture.

Cox is one of the largest media companies in the country, with assets ranging from the Atlanta-Journal Constitution newspaper to six TV stations. In cable TV Cox has 1.7 million subscribers. Its programming interests include stakes in E! Entertainment TV and pay-per-view operator People’s Choice. Last year, privately owned Cox had revenue of $2.4 billion.

The company now appears ready to leave behind an overly cautious past. (In 1987, for example, Cox passed up buying Turner Broadcasting System because it would have had to sell an Atlanta TV station to comply with federal law.)

BellSouth shares fell $1.875 to $58 on the New York Stock Exchange. QVC fell 25 cents to $56.25 a share in Nasdaq trading. Paramount fell 37.5 cents to $76.625 a share on the NYSE. On the American Stock Exchange, Viacom Class A shares rose 50 cents to $56.625. Viacom Class B rose $1 to $52.75 a share.

BellSouth at a Glance

* Headquarters: Atlanta

* Chairman: John L. Clendenin

* Number of employees: 97,100

* 1992 sales: $15.2 billion

* 1992 profit: $1.7 billion

* 1992 earnings per share: $3.38

* Regulated operations: Provides local dial tone to about 19 million subscribers in nine Southeastern states.

* Non-regulated operations: Publishes about 500 Yellow Pages advertising and White Pages telephone directories, offers cellular service to 1.3 million customers, provides paging service to 1.1 million customers.

* Recent developments: In July, the company filed a proposal with the FCC to allow commercial use of part of its telecommunications network, which would speed development of new services such as voice recognition, text-to-speech translation and personalized telephone numbers.

Source: Standard & Poor’s Corp.; Bloomberg Business News

Researched by ADAM S. BAUMAN / Los Angeles Times