Wall Street Suspects Viacom Might Revise Paramount Bid

As Wall Street gave a lukewarm response to Viacom’s new bid for Paramount Communications, many analysts and traders were expecting Viacom to revise the back-end, non-cash component of its offer for the movie studio and book publisher, perhaps by the end of the week.

Viacom, the parent company of MTV and Nickelodeon, surprised investors last week by announcing it would acquire home video retail giant Blockbuster Entertainment for $8.4-billion and boost its cash offer to $105 per share for 50.1% of Paramount’s stock.

Viacom made the revised, two step merger-and-bid announcement literally hours before the deadline for a rival tender offer from home shopping channel QVC Network was set to close.

The gambit, although immediately disparaged by Wall Street traders who complained that the overall value of the Paramount-Blockbuster bid still fell short of QVC’s offer, nonetheless caused enough confusion to keep Paramount shareholders from tendering their stock to QVC.

Analysts over the weekend expected QVC to launch another court battle claiming that Viacom had violated bidding procedures agreed to by all parties, but a source close to QVC cautioned against such speculation.

Viacom Sunday said its revised offer for Paramount “fully complies with the bidding procedures” and that QVC also was not required to extend its tender offer until Jan. 21. Viacom said its sweetened bid boosts the cash component by more than $1.1 billion over its previous offer and by more than $800 million over QVC’s bid.

QVC appeared to be taking a wait-and-see attitude, hoping that once the dust settled early this week shareholders would begin tendering their shares to them.

A source close to QVC said that in the wake of the Viacom-Blockbuster announcement “the entire community froze and no one will tender their shares.”

But the source expressed confidence “next week they’ll start the process.”