Seeking to comply with a stern Delaware Supreme Court ruling that Paramount must shop itself fairly to all interested bidders, the company’s board of directors is scheduled to meet this afternoon to iron out procedures for setting up an auction.
The board will proceed under the scrutiny of Chancery Court Judge Jack Jacobs , whose earlier ruling was upheld by the Supreme Court, and who is charged with applying the court’s decision. If he’s unhappy with the board’s actions, Jacobs himself could set down guidelines for conducting an auction.
But sources say Paramount is determined to retain control of the sale process. To that end, the board Friday sent a letter to Jacobs seeking to assure him that it would fully comply with the Supreme Court’s order. The letter said Par’s board will “adopt fair procedures (to) consider any and all bidders and bids.”
Paramount also sent notice of the meeting to lawyers of hostile bidder QVC Network.
The board’s agenda today will include the issue of whether a committee of independent members of the board should be formed to review bids.
While both the Viacom and QVC tender offers are scheduled to expire at midnight tonight, both are expected to be extended following some kind of announcement from the board regarding the auction process. As of Thursday, 16.9 million shares had been tendered to QVC’s offer, with just 9.2 million shares tendered to Viacom.
An auction could set off a new round of escalating bids, despite the already high offers on the table.
Wall Street sources say it will be up to Viacom chairman Sumner Redstone to raise his bid if he wants to remain in the race. Based on Friday’s market close, Viacom’s offer is valued at about $ 9.3 billion, or $ 78.25 a share, still significantly below QVC’s bid, which stands at about $ 9.9 billion or $ 83.25 a share. Shares of Paramount shot up $ 2.75 per share after the ruling in anticipation of a new round of bids.
Kidder, Peabody analyst Alan Gould on Friday cut his rating on Paramount to “source of funds,” or sell, from neutral. He said a new round of bidding for Paramount could be expected in the $ 90- to $ 92-per-share range, but bids would be half cash and half paper and the stock would probably trade in the $ 80 range.
Both Redstone and his second-in-command, Frank Biondi, reiterated Viacom’s strength and growth potential regardless of a Paramount merger.
Biondi also emphasized that the company’s strategic partnerships with Blockbuster Entertainment and Baby Bell Nynex (both of whom were brought in to bolster Viacom’s Par bid) would go forward even if Viacom does not win Paramount.
He said Viacom and Blockbuster are exploring ways to combine their distribution operations and that Viacom will definitely go into the retailing business with Blockbuster lending its expertise to that endeavor.