Bids Heat Up for Madison Square Garden

Despite an effort to make a preemptive bid for Madison Square Garden, sources said Wednesday that the self-proclaimed “manifest destiny” of cable TV giant Tele-Communications Inc. to acquire the famous New York sports and entertainment complex is far from assured.

TCI faces serious, deep-pocket competition from several other bidders, notably a determined team formed by ITT Corp. and Cablevision Systems.

Bids are due by Aug. 15 under the terms of an auction being staged by Viacom Inc., which acquired the Garden with its cable network and two professional sports teams as part of the takeover of Paramount Communications Inc.

Published reports have suggested that TCI has the edge because it could use the Garden as a deal-breaker for completing three other transactions with Viacom: a merger of two premium cable services, Viacom’s Showtime with TCI’s Encore, and the sale of Viacom’s cable systems to a TCI affiliate. If these deals are completed, Viacom is expected to drop an antitrust suit filed against TCI last year.

But Viacom Chairman Sumner Redstone is unlikely to capitulate on the Garden, sources said, because he has a fiduciary duty to accept the highest bid. “This is going to go to the highest bidder,” insisted one source, who added that Viacom has viewed some of the news stories favoring TCI as “an attempt to chill the bidding process.”

Viacom is seeking at least $1 billion, but that figure hasn’t deterred cash-rich ITT or its partner, Charles Dolan’s Cablevision Systems, sources said. Shoe manufacturer NIKE Inc. and Canadian brewer John Labatt Ltd. are also said to be in the running.

Cablevision Systems, one of the nation’s largest cable operators, already runs a sports channel in the New York area. ITT, for its part, is eager to invest in Madison Square Garden because it already owns other choice real estate in Manhattan and would like to offer televised sports events throughout its Sheraton hotel chain.

But one TCI executive has said it is the company’s “manifest destiny” to acquire the Garden. TCI needs the New York market to create a national sports service linking the regional sports services it already owns.

One source involved in the TCI-Viacom negotiations said that no resolution is expected for at least 10 days. Only Viacom would comment Wednesday, calling the talks “very complex and continuing. No decisions have been made.”