QVC weighs in with higher bid

QVC Network increased its tender offer Monday for Paramount Communications Inc. to $ 92 per share.

QVC late Monday made public its bid for 51% of outstanding Paramount shares and said Par had informed QVC that it was the higher bidder. Based on closing stock prices, the bid was worth a little more than $ 10.1 billion.

Viacom could not be reached for comment.

Both QVC and Viacom submitted new bids under procedures set up following the Delaware Supreme Court’s affirmation of a lower court decision that threw out Par’s poison pill defenses against QVC.

Analysts have said previous offers, just under $ 10.1 billion from QVC and $ 9.6 billion from Viacom, were already more thanParamount was worth.

Paramount financial adviser Lazard Freres was expected to pull an all-nighter studying the bids and to make its recommendation to Paramount’s board today.

But while the Par board could announce a winner as early as this afternoon, Wall Street sources said the board could be expected to go back to the lower bidder and encourage it to raise its bid.

A stern Delaware Supreme Court ruling handed down early this month has put the pressure on Paramount to get the highest price for its shareholders, regardless of the party making the offer.

Paramount had planned not to disclose the bids to protect its closed auction.

The West Chester, Pa.-based QVC, after earlier saying the Securities & Exchange Commission prevented disclosure, reversed that claim and released the bid information late Monday.

A spokesman for Viacom earlier Monday said the company had no comment about its bid or the process it went through making it.

QVC said its reasoning for wanting to announce a sealed bid was that it believed securities laws required it to do so because that bid represented a revision to its outstanding tender offer.

But in a letter to Paramount last week, QVC’s lawyers argued that the best way to run the auction was open and public bidding until the highest offer was received. Paramount dismissed QVC’s recommendation, saying the “notion of open and public bidding will risk failing to achieve the best possible value to Paramount stockholders.”

While the bidders had been expected to sweeten their deals, stock analysts were dubious over just how much higher the bidding can go. Jessica Reif of Oppenheimer & Co. pointed out that at $ 90 a share or $ 10 billion, Paramount was priced at an astounding 25 times 1993 cash flow. That’s a higher valuation than Sony paid for Columbia ($ 5 billion or about 21 times cash flow) or Matsushitapaid for MCA (about $ 6.6 billion or 16 times cash flow); both were labeled overpriced and have achieved debatable success.

It’s also higher than the company’s breakup value, which Reif estimated at $ 7.8 billion.

Even so, arbitragers bumped up the stock of Paramount 25 cents to close at $ 81.63. Viacom Class A shares dropped $ 1 to close at $ 49.25; its Class B shares slipped $ 1 to close at $ 45.25. QVC gained 25 cents to close at $ 43.50.

Under QVC’s new bid, “shares not purchased in the tender offer will be converted in the second-step merger into (1) 1.43 shares of QVC common stock, (2 ) .32 shares of a new series of 6% cumulative non-convertible exchangeable preferred stock of QVC … (for which) the dividend rate has been increased from 5%-6% and (3) .32 warrants to purchase one share of QVC common stock per whole warrant at a price of $ 70.34 per share” exercisable at any time prior to the 10 th year anniversary of the merger.

The company said: “The warrants will be exercisable with cash or using an equivalent amount of liquidation preference of the 6% cumulative exchangeable preferred stock or principal amount of debentures into which the preferred stock was exchangeable. The warrants will be callable at $ 15 per warrant on and after five years from the issuance.”

Separately, QVC alleged in a court filing that WMS Industries’ actions to halt a subpoena seeking information about WMS’ purchase of Viacom stock is an “effort to obstruct and delay discovery so that expedited discovery on these issues will be unavailable to QVC.”

WMS — which is about 25% owned by Viacom chairman Sumner Redstone — purchased approximately 500,000 shares of Viacom B stock during the last week of September (a critical time in Viacom’s pursuit of Paramount) at a cost of at least $ 25 million. WMS’ defense that its purchases of Viacom stock are irrelevant to the litigation is “frivolous … The purchases made by WMS, possibly at Redstone’s behest, strike at the integrity of the value of Viacom stock,” QVC said.

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