Diller Builds a Cash-Rich Batting Lineup

With Cox Enterprises and Advance Publications joining his bid for Paramount Communications, Barry Diller may appear to have more partners than the neighborhood polygamist. But their backing could make Diller irresistible to the only partner that matters: Paramount’s stockholders.

The combined $1 billion from Cox and Advance--when added to the equal amount pledged by Liberty Media and Comcast Corp. and to bank financing--enables Diller to raise the cash portion of his offer from $30 a share to more than $38 a share. Analysts see that as a significant development, since cash is king in the fierce competition for Paramount.

Diller’s overall offer is valued about $1.5 billion higher than the rival bid from Viacom Inc., and sources say the QVC Network chairman has at least two other investors in the wings should he need to raise the cash portion more. They refused to identify the would-be partners, but expect that Diller will await the Paramount board’s reaction before making further moves.

In connection with that, QVC expects to send all of its updated financial information to Paramount today, according to one source close to the deal.

While there’s been speculation that BellSouth might mount an independent bid for Paramount, sources say it’s now more likely that the Baby Bell would team up with another investor, such as Diller.

Another possible cash source for Diller is TCI Chief Executive John C. Malone, who controls Liberty and who agreed to sell TCI to Bell Atlantic last week.

“Diller’s got more (cash) if he needs it, but this is a pretty good start,” said one executive close to the QVC chairman. “He’s not going to do anything more until he sees the reaction to all this.”

Viacom Chairman Sumner Redstone, whose bid is supported by Paramount Chairman Martin Davis, is also expected to stand pat until Paramount’s board makes a move. No one knows when that will happen, since the board hasn’t given any time frame for evaluating Diller’s bid. But analysts maintain that it’s just a matter of time before Redstone sweetens his offer, which contains only $9.10 a share in cash.

Like Diller, Redstone has brought partners to the table. Nynex, another regional phone company, has pledged $1.2 billion toward the deal, if completed. Blockbuster will kick in another $600 million.

Merrill Lynch analyst Harold Vogel said he doesn’t see any need for Diller to further increase the cash in his offer, since he has such a tangle of backers. “You already need a road map to follow it,” Vogel said.

As for Redstone, Vogel said he may want to bring in more money as a “backstop.” But the analyst agreed that the next move is Paramount’s.

If the partnerships are confusing to people following the Paramount bidding, they may prove even more troublesome once the deal is done, due to the strong personalities of the players.

The logo alone might have to read: “Paramount--a QVC, Comcast, Liberty, Cox, Advance Publications company,” or “Paramount--a Viacom, Nynex, Blockbuster company.”

In the old days--like two years ago--Hollywood deals were more linear. Sony bought Columbia Pictures from Coke. Matsushita bought MCA from its shareholders. Time bought Warner. (Well, OK, that one was kind of complicated.) But tighter credit and the scramble to climb aboard the new technology bandwagon have changed things.

“The ‘80s were a decade of vertical integration, but the ‘90s are much more a decade of horizontal integration,” said Jeffrey Logsdon, an analyst with the Seidler Cos. in Los Angeles. “Companies can gain advantages from strategic alliances and avoid all the commitment of capital. All you have to pay is some kind of a control premium.”

As that battle dragged on Monday, Paramount was the only winner on Wall Street. Its shares rose $1.125 to $77 on the New York Stock Exchange. QVC eased 50 cents, to $57.50 in Nasdaq trading. Meanwhile, Viacom A shares fell $1.75 to $62.50; the B shares lost 62.5 cents to $56.625 on the American Stock Exchange.

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Meanwhile, Paramount Publishing is said to be one of the finalists in bidding for Macmillan Publishing Co., in a deal expected to range from $250-to-$700 million.

If Paramount’s bid is accepted over others anticipated from K-III Communications Corp., Pearson, Harcourt General Inc. and Walt Disney Co., Paramount will use up a significant chunk of the $1 billion in cash and short-term investments reported on its July 31 balance sheet.

Both QVC and Viacom appear to have built sufficient war chests, however, to pursue Paramount, no matter how much equity Davis spends down in the interim. Macmillan is one of the key assets owned by Maxwell Communications Corp., which filed for Chapter 11 bankruptcy law protection in December, 1991.

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Speculation continues over another possible deal involving TCI’s Malone, who was just named the most powerful man in entertainment by the influence diviners at Entertainment Weekly.

Sources say Malone met with top executives from MCA as recently as last week. While the nature of the talks is not known, Malone is said to be interested in acquiring a 50% stake in a major studio to bolster programming for his cable networks.

MCA’s assets include Universal Pictures. Matsushita Electric Industrial Co., its parent, is said to be open to a deal, but sources say there is no indication that anything is imminent.

Malone also is said to have considered overtures to Sony and Fox.

On another Malone front, sources say the cable magnate issued an ultimatum to Bell Atlantic two weeks ago when their $30-billion merger talks stalled: Make the deal or get out of the way. Bell Atlantic’s purchase of TCI was announced Wednesday.

Times staff writer Kathryn Harris contributed to this story.