Paramount Board Still Backs QVC : Mergers: Directors say Viacom’s revised offer won’t change recommendation to shareholders.

Paramount Communications Inc.’s board Wednesday unanimously reaffirmed its recommendation that shareholders accept a QVC Network Inc. bid for the entertainment giant over a revised offer from Viacom Inc.

Despite the higher cash amount contained in Viacom’s offer, the board said the aggregate value of the QVC bid represents the “best value” for shareholders.

At the same time, the directors did not rebuke Viacom for its 11th-hour revision of its bid, as QVC attorneys had proposed in an acerbic, four-page letter to the board. Some analysts expect Viacom, which last week entered into a merger agreement with Blockbuster Entertainment Corp., to raise its offer again before shareholders choose between the rival bids.

In a prepared statement, Paramount Chairman Martin S. Davis said the auction rules established by the company were designed to prevent any more bids from being submitted after Feb. 1, and “that deadline will not be extended.”

Trading on Wall Street ended before Paramount disclosed its board’s action. On the New York Stock Exchange, Paramount closed at $77.25, down 13 cents. QVC rose $1.13 in Nasdaq trading to close at $41 per share. Viacom Class A closed at $41.50, down 88 cents, while Viacom Class B was unchanged at $38.88.

Since Friday--when Viacom increased the cash portion of its bid by $1.1 billion but reduced the securities it is offering by $900 million--the Viacom bid has trailed that of QVC’s by at least $500 million in the marketplace.

Some stock speculators said Wednesday that they expect Viacom to change its offer before Jan. 21--when its current bid expires--in order to extend its offer 10 business days (as required by securities law) and make a final bid Feb. 1.

“I don’t think Paramount’s endorsement really means anything,” said one trader, speaking not for attribution. “I really think it was a non-event.”

He added, “I don’t think Viacom wanted an endorsement of their present proposal, because QVC could haul both Paramount and Viacom into court and complain that the bidding procedure was rigged.”

Paramount set aside its friendly merger agreement with Viacom after two court rulings in Delaware chastised its board for awarding Viacom certain “lockup” provisions and refusing to consider QVC’s unsolicited bid. After the Delaware Supreme Court ruled, the Paramount board declared an auction of the company.

Since the auction began, both QVC and Viacom have reduced their cash tender offers to 50.1% of Paramount’s shares, instead of the 51% proposed in earlier tender offers.

QVC took that action Dec. 23, when it published a supplement to its tender offer, but the development was widely overlooked because QVC had issued a news release Dec. 20 saying it proposed “to increase the cash component of its tender offer for approximately 51% of the outstanding Paramount shares from $90 per share to $92 per share in cash.”

When asked about the change, a QVC executive said the company made its initial tender offer for Paramount’s outstanding shares; the current offer includes options as well.

As a result, he said, QVC is actually offering to pay cash for a greater number of shares, despite the reduced percentage.

“We didn’t do a press release on it; I think it should have been explained,” the executive said, asking that he not be identified.

On Jan. 7, Viacom followed suit, reducing its cash offer to 50.1% from 51%.