QVC’s Paramount Offer to Start Today : Mergers: After Viacom’s matching bid, pressure is on Diller. But delaying another offer has strategic advantages.
QVC Network Inc. is expected to begin its cash tender offer todayfor 51% of Paramount Communications Inc., without trying to top an equivalent bid launched Monday by Viacom Inc.
QVC Chairman Barry Diller remains under pressure to raise his $80-per-share offer significantly, since Viacom has already negotiated a friendly merger agreement with the Paramount board and cleared the federal government’s scrutiny for antitrust problems.
In retrospect, several Wall Street executives said, QVC erred by not launching its tender offer weeks earlier, which would have allowed the company to seek clearances in Washington on a competitive basis with Viacom. But both Diller and his chief legal adviser, Martin Lipton, wanted to give the Paramount board a chance to negotiate with them, said one executive involved in the QVC bid.
Now, Wall Street analysts and bankers said, another round of bidding could emerge. Viacom delivered “a very strong counterpunch,” said one Paramount shareholder. “Now Barry regroups and decides whether he wants to make another bid.”
For strategic reasons, however, QVC does not have to immediately raise its bid, Wall Street traders said. Under the securities law governing tender offers, a change in price would require QVC to keep its new offer open 10 days. During the last 10 days of its tender offer, QVC could effectively reset the clock by raising its price.
Presumably, Viacom would have difficulty raising its bid simultaneously, so QVC could take the lead by a day or so.
In connection with its tender offer, Viacom filed documents with the Securities and Exchange Commission detailing some of the background leading up to its offer. It disclosed, for example, that it offered $63 a share for Paramount in the course of talks that collapsed July 7.
When a merger agreement was eventually reached Sept. 12, Viacom agreed to soften the terms of the two “lockup” provisions it initially sought. Instead of a $150-million breakup fee, for example, Viacom agreed to settle for $100 million if the merger was terminated.
The lockup provisions are currently being challenged in a Delaware state court by QVC, but no hearing date has been set.
In a related event, Viacom Chairman Sumner Redstone and Paramount Chairman Martin Davis are scheduled to speak on behalf of their merger agreement today in Washington before the Judiciary Committee’s antitrust panel.
Sen. Howard Metzenbaum (D-Ohio), chairman of the panel, has summoned a number of cable television and telephone industry heavyweights to testify about the impact of their pending mergers on consumers.
Times wire services were used in compiling this report.
