Viacom Squeeze Play Hikes Paramount Bid : Business: $85-a-share offer is a preemptive strike against QVC Network in effort to acquire media giant.

In a preemptive strike aimed at knocking rival QVC Network off guard, Viacom Inc. on Saturday made a sweetened bid for Paramount Communications, increasing its tender offer to $85 a share.

The move, which analysts said was meant to disrupt QVC’s sensitive negotiations with investors, puts added pressure on QVC Chief Executive Barry Diller to substantially improve the terms of his hostile offer.

Diller and his partners are in the middle of discussions that would allow one of QVC’s chief backers, cable giant Tele-Communications Inc. affiliate Liberty Media Corp., to withdraw and be replaced by BellSouth Corp., a regional telephone company.

While QVC was clearly taken by surprise by Viacom’s move on Saturday, sources close to the company said it will still move forward in the bidding war.

“I assume what Viacom’s trying to say is if you want to win here it’s going to cost a lot, and they’re doing it early to send that message. We had to anticipate that they would raise their price,” said a person close to QVC.

Diller could not be reached for comment Saturday. From his home in Atlanta, BellSouth Chief Executive John L. Clendenin declined to comment on his firm’s next move.

But the head of the cash-rich Baby Bell, which had operating revenue of $15.2-billion last year, did not seem overly concerned as he spent the day with his family.

“I have three grandkids here that I have to go play with,” Clendenin said.

Viacom’s surprise action to sweeten its bid, while not decisive, probably means that the bidding war for Paramount will escalate to more than $90 a share before one of the two rival bidders bows out. Analysts say that QVC must increase its bid by $5 to $10-a-share to stay competitive.

“QVC has to decide whether to leapfrog Viacom’s bid,” said Jessica Reif, an analyst with Openhiemer & Co. in New York. “They just can’t match it.”

Also, by moving now, Viacom is able to preserve the tactical advantage it holds in having its offer expire on Nov. 22, two days before QVC’s tender expires. Analysts have said that, everything else equal, Paramount shareholders are more disposed to take the earlier offer.

The revised Viacom bid calls for the company to pay $85 in cash for 51% of Paramount’s stock and $85 in Viacom stock for the remainder in a mix of common and convertible shares. Altogether, Viacom has raised its friendly bid nearly $600 million, boosting the overall value of the deal to more than $10 billion--about 7% above its previous value.

Both Viacom and QVC had been offering $80 a share in cash for 51% of Paramount, with the remaining 49% to be acquired in stock swaps worth about $80 a share. The values of both deals, which fluctuate daily due to changing stock market prices, were roughly $10 billion.

Edward T. Hatch, an entertainment analyst with UBS Securities in New York, called the sweetened bid “a very pro-active move by Viacom in the middle of QVC’s negotiations with BellSouth and its partners; . . . it sends the message: Are you prepared to step up?”

The answer depends on how willing QVC and its partners, which include Comcast Corp., Cox Enterprises and Advance Publications, are willing to go in their efforts to win Paramount.

QVC’s equity investors so far have each agreed to put up $500 million. In addition, QVC has raised $3 billion in debt financing. Viacom has raised $1.8 billion in equity financing from Nynex and Blockbuster Entertainment and $4.5 billion in bank commitments.

Analysts said that Diller is handicapped in part because he cannot act unilaterally and must consult his partners. While all of the partners still appear committed to the deal, it is not clear if they are all willing to put up the extra money it will take to win Paramount.

BellSouth is expected to invest about $2 billion in QVC, taking the place of Liberty Media Corp., which now wants to distance itself from the transaction.

The decision to cut its ties with QVC has been spurred by regulator concerns on Liberty Media’s part, which is in the process of being reacquired by Tele-Communications Inc. TCI has agreed to merge with Bell Atlantic, and regulators are said to be increasingly leery about the cable giant’s spanning interests in cable, telecommunications and entertainment.