Paramount Board Reaffirms Support for Viacom Offer

The board of Paramount Communications Inc. reaffirmed its support for a friendly merger with Viacom Inc. on Monday as the bidding war entered its eighth week, while rival QVC Network Inc. appeared close to finalizing a deal with BellSouth Corp. that would allow it to increase its offer.

Sources close to QVC also revealed that Liberty Media Corp. may now remain as a partner in the rival bid, even if BellSouth comes on board. Earlier speculation had Liberty withdrawing its 22% stake in QVC because of concerns that Liberty’s presence would be a crippling liability with antitrust regulators.

Sources widely expect QVC to raise its tender offer for Paramount, although not before Wednesday. If QVC waits beyond Wednesday, the expiration date would be extended past Nov. 24. That would give QVC more time to arrange financing, since Viacom might also be forced to respond with another bid.

The task for QVC appears Herculean. Viacom topped its bid by $5 per share over the weekend and is prepared to conclude its own tender offer by Nov. 22. Meanwhile, QVC is still in financial discussions with investors and would-be partners.

In addition, Viacom has already cleared an antitrust review by federal regulators, while QVC has been asked for additional information by the Federal Trade Commission. Liberty’s role--and the extent to which it would participate--is expected to be decided by Wednesday.

Liberty executives Monday were still plowing through the FTC’s request Friday for more information regarding the antitrust implications of Liberty’s involvement with QVC.

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“Almost everything is still up in the air,” said one source close to Liberty. “There are so many pieces of this and so many parties. There’s been a lot of activity today and this weekend. We’re just trying to decide what we’re doing.”

While BellSouth is standing in the wings as a possible QVC investor, sources said no formal deal has been struck. “We do want some control,” said a source close to BellSouth. “We want some say-so. We want a hand in the management of the company. We’re not going to be an investor, we’ll be a partner.”

The source added, however, that control is not the primary obstacle to an agreement, saying the delay has more to do with regulatory concerns regarding the role of Liberty in QVC.

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Meanwhile, a growing number of Wall Street analysts and bankers Monday called Paramount’s rising price grossly inflated and predicted difficult times ahead for the winner, who will be faced with recouping the investment.

“It will be a good number of years before the synergies, whatever they may be, offset the acquisition cost,” said Tom Wolzien, an analyst with Bernstein Research in New York. “That doesn’t mean it’s not a good idea for the long term; it’s just a long way off.”

Paramount shares jumped $1.875 to a new high of $82.125 on the New York Stock Exchange. Viacom class A shares lost 62.5 cents to close at $56.875, while Viacom class B fell $3 to $48.50 on the American Stock Exchange.

QVC slipped 37.5 cents to $52.875, after trading as high as $55.75 early in the day.

In late October, Viacom and QVC launched partial tender offers for 51% of Paramount, promising to pay $80 per share in cash. Each company said it would issue stock for the remaining 49% of Paramount at a later date. On Saturday, Viacom raised its bid to $85. Those offers raised the overall value in the Paramount bidding to about $10 billion.

While Viacom’s revised $85 bid is noted by Paramount Chairman Martin S. Davis, no mention of the cash value of QVC’s bid is made in the Nov. 8 letters now being mailed to Paramount shareholders. One letter deals with the Viacom tender offer and omits any mention of rival bidder QVC. The second letter advises against the unsolicited QVC offer and reiterates the Paramount board’s support for Viacom.

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The board’s formal recommendation on the two tender offers is required under securities law. In the five-paragraph letter, Davis said the board was unanimous in concluding that the Viacom merger “should provide” superior long-term value to Paramount’s stockholders, although he also urged shareholders to read accompanying documents carefully.

In its documents, Paramount outlines the history of the bidding war. It also notes it has paid $3 million to Lazard Freres & Co. for acting as its financial adviser and will pay another $9.5 million if a merger or business combination is completed by Sept. 12, 1995.

Times staff writer John Lippman contributed to this report.