Secrets Used in Paramount Bid, Viacom Charges

Viacom Inc. has accused a leading entertainment industry investment bank of exploiting confidential information to help Viacom’s opponent in the takeover battle for Paramount Communications Inc.

In court papers released Thursday, Viacom alleges that Allen & Co. gained access to confidential Paramount information when it worked on a Paramount/Viacom merger proposal in 1990--and is now using that information to help QVC Network Inc. in its hostile bid for Paramount.

Allen & Co. officials could not be reached for comment.

The documents were filed in Delaware Chancery Court as part of a QVC lawsuit aimed at voiding key provisions of the merger agreement between Paramount and Viacom. QVC needs at least a partial victory to continue its battle. A decision is expected soon.

Paramount shares stabilized in advance of the court ruling, dropping 50 cents to $77 after falling dramatically over the past several days. Viacom Class A shares were down 62.5 cents to $50.375. QVC gained 87.5 cents to $50.375.

In their briefs, Paramount and Viacom provided an unusual look at the intertwining relationships of Allen & Co., a small but powerful New York firm that is involved in many media deals.

In August, 1990, according to the Viacom brief, Allen & Co. was retained to help evaluate a possible Paramount/Viacom merger. “Using this confidential information from Paramount . . . Allen & Co. produced a voluminous study entitled ‘Project Lightbulb,’ which, among other things, analyzed three possible acquisition scenarios and included numerous projections and financial analyses of both Paramount and Viacom.”

Those talks never came to fruition, however, and when Paramount and Viacom began talking again in the spring, a different investment banker--Robert Greenhill of Smith Barney--was involved. Allen & Co. then went to work for QVC and helped it prepare a hostile offer for Paramount.