Viacom Raises Paramount Bid by $800 Million in Cash, Stock : Mergers: Analysts say the sweetened offer shifts the pressure to rival QVC’s Barry Diller to again increase his bid.
Viacom Inc. on Tuesday again raised the stakes in the bidding for Paramount Communications Inc., with an offer that puts it on roughly equal footing with rival QVC Network Inc.
Both bids are now valued at about $10.4 billion, as the Feb. 1 deadline for submitting offers draws closer. Analysts say the pressure has shifted to QVC Chairman Barry Diller, who might have to raise his bid again to maintain his advantage over Viacom Chairman Sumner Redstone.
Redstone’s new offer contains $800 million in additional cash and stock, plus a partial guarantee that Viacom will make up the difference if its stock falls below a minimum value.
In cash terms, it exceeds the value of the QVC bid by nearly $900 million. But QVC’s package of securities for the “back end” portion of its two-tiered bid remains higher.
During the course of market trading Tuesday, the blended value of QVC’s bid was pegged $1 to $2 higher per share by some on Wall Street. But traders cautioned that the value of QVC shares is expected to fall if QVC actually wins the bidding contest.
“On the surface, Barry’s bid is higher but Sumner’s bid has more cash and the back end has a little more certitude,” said Mario Gabelli, a New York money manager with about 4.2 million Paramount shares.
Gabelli predicted that Diller will adjust his offer because he’s “too far apart on the cash part.” He added, “If he buttresses the back end (of the offer) substantially, he may still be able to win with less cash.”
Diller, who last week said he had made his final offer, was mum Tuesday about how he might respond. Under the rules of the auction, Paramount has declared Feb. 1 the final date for any changes in the bids. With its move, Viacom has pushed the expiration of its new offer to midnight Jan. 31.
For its part, Paramount issued a terse statement saying its board would meet this week to consider the new Viacom bid. Paramount abandoned an earlier, friendly merger agreement with Viacom after the Delaware courts rebuked the board for failing to weigh QVC’s unsolicited offers seriously. When an auction was initiated Dec. 20, QVC submitted the highest bid, and the Paramount board currently has a merger agreement with QVC.
The final decision, however, rests with Paramount shareholders, who will determine the winning bid by tendering 51% of their shares to one of the competing bidders.
For that reason, arbitragers continued to predict Tuesday that the bidding will go down to the wire.
“I expect QVC to go up sometime between now and Jan. 31,” said Eric Rosenfeld, managing director of Oppenheimer & Co.’s arbitrage department. “You’re going to get a disinformation campaign saying this is the final (Viacom) bid. Feb. 1 at 5 p.m., you’ll see a final bid.”
In a letter to the Paramount board, Viacom hinted broadly that it is making its final bid, by saying its new offer “is at the highest level that we believe would be in the interests of not only the Paramount stockholders, but the stockholders of Blockbuster and Viacom.”
This is the fourth time Viacom has raised its bid since it initially offered $69.14 in the merger deal of Sept. 12. The current cash portion of its bid is $107 a share.
The role of Blockbuster Entertainment Corp. has become crucial to Viacom because it is providing much of the cash and is scheduled to merge with Viacom in an $8.4-billion transaction. Some sources suggested that the video rental giant’s directors were cool to the idea of yet another revised bid. But a source in the Blockbuster camp denied it was a tough sell.
Paramount shares rose $1.25 to close at $80 on the New York Stock Exchange on Tuesday. Viacom Class A shares fell $1.75 to $40.25, while Viacom Class B sank $1.375 to $37.75. QVC slipped 50 cents to close at $43.
In a separate development, Paramount spurned most of QVC’s suggestions for changes in its auction rules. Among other things, QVC complained fiercely last week that a last-minute bid by Viacom on Jan. 7 violated the auction process, but Paramount’s outside counsel wrote QVC attorney Martin Lipton that “Paramount has no reason to believe that the Jan. 7 Viacom offer was in breach” of the rules accepted by both parties.
Times staff writer James Bates contributed to this report.
Bids at a Glance
Viacom-Blockbuster and QVC are both offering cash for 50.1% of Paramount stock and packages of securities for the remaining stake. The cash represents a fixed value for Paramount shareholders, while the securities fluctuate in value. Viacom has raised the cash portion of its bid to $107 while sweetening the securities portion by establishing a minimum value guarantee on its stock. Here is a brief synopsis of the current offers:
Viacom- Blockbuster QVC new bid current bid Cash value per share: $107 $92 Securities value per share: $62.14 $77.49 Blended value per share*: $84.62 $84.75 Total value (billions): $10.4 $10.4
*with no discount applied for convertible preferred shares.
Source: Wire reports. Researched by ADAM S. BAUMAN / Los Angeles Times
