As Paramount Deadline Nears, QVC Denies Violation of Bidding Rules

Amid a cross-fire of complaints, QVC Network Inc. insisted Friday that it is abiding by auction rules for Paramount Communications Inc. and refused to tip its hand about any last-minute help it might get from wealthy backers that include BellSouth Corp.

Despite the severe winter storm Friday that closed New York airports and stock exchanges, the combatants for Paramount sniped at one another via facsimile machines and press releases, trying to gain the upper hand before their tender offers expire at 9 p.m. PST Monday.

Since Feb. 1, Viacom Inc. has appeared to be in the lead because its stock-and-cash bid contains slightly more cash and some protection for Paramount shareholders if Viacom shares decline in value. But QVC, which has offered no such protection, has stirred hopes on Wall Street that it might come back with a better bid Tuesday if Viacom fails to gain the 50.1% of Paramount shares required under the auction rules.

QVC has not discouraged speculation that BellSouth or other backers--which include Comcast, Cox Enterprises and Advance Publications--may announce a plan to buy QVC shares in the open market, which would bolster the value of QVC shares issued to Paramount shareholders.

Late Thursday, Viacom protested that QVC was making a “backdoor attempt” to change its bid after the Feb. 1 deadline.

On Friday, Paramount said it had received inquiries from confused shareholders and the Securities and Exchange Commission. Paramount dispatched a letter to QVC’s lawyer expressing “grave concerns” about QVC’s compliance with the auction rules.

In response, QVC legal adviser Martin Lipton said that “QVC has not violated the bidding procedures and has no intention of doing so.” Lipton complained that Viacom had made “erroneous and misleading statements” about the auction process to Paramount shareholders in private meetings Thursday.

Paramount responded with a second letter, promising to look into Viacom’s conduct but pointedly asking a second time “whether there are any plans or intentions with respect to open market purchases of QVC stock by its investors or any other party and, if so, why you believe they do not violate the bidding rules.”

As of late Friday, QVC had no response.

Paramount shares closed unchanged at $76.875 on Friday, while those of QVC rose $1.25 to $46.875. Viacom Class A added 25 cents to $36.50, while Viacom Class B fell $1.125 to $31.625. The shares of the perceived winner decline in value because victory will mean the assumption of debt.