QVC lets curtain fall on bidding

Today could well be the end of the long fight for Paramount Communications Inc., after QVC Network said Sunday that it will not raise its bid for the studio. That greatly improves rival Viacom Inc.’s chances of victory when both tenders expire at midnight EST.

If neither party gets 50.1%, the current auction rules expire and Wall Street types say both parties could then renew the bidding.

If there is a clear winner, however, its offer must remain open for 10 days to allow all investors the chance to tender. This non-coercive format means Par shareholders who thought QVC would raise its bid could avoid tendering without penalty. But with that hope gone, Wall Street types say investors will likely throw their support to Viacom and end everything.

Short-term traders, who own about half of Par’s outstanding shares, were expected to tender to Viacom even before Sunday rather than continue paying the cost of carry on their holdings. About 10% of Par shares are in non-tenderable options.

“Investors are anxious to see the Paramount transaction completed and we believe that they are leaning toward tendering to Viacom at this point,” said Salomon Bros. analyst Frederick Moran.

Sunday’s statement by QVC followed a flurry of accusations late last week as Viacom alleged QVC violated securities laws by hinting to Wall Street that it might improve its bid.

“QVC will make no change in its bid. Any speculation to the contrary is inappropriate,” the shopping network said Sunday. It defended its bidding strategy and also noted that at current prices, Viacom’s so-called “collar” or price protection on the securities included in its offer does not apply.

Viacom responded with a statement labeling QVC’s charges erroneous and declaring its offer “clearly superior to that of QVC.”

Paramount said Friday it won’t guarantee any bidding procedures after the deadline. One source close to the studio said if no one gets 50.1%, several options will be on the table when the Par board examines the tender results.

‘Wait and see’

“They’ll wait and see what the situation is,” the source said. “If 45% is tendered to Viacom and 2% to QVC, they may do one thing. If 20% is tendered to each, they may do another thing.”

After Viacom sent Paramount a letter late Thursday urging it to stop what it called QVC’s illegal market manipulation, Paramount rapped the shopping channel on Friday, citing “grave concerns” about its compliance with the auction rules.

In a letter to Par early Friday, QVC denied it had broken any rules and defended its right to revise its bid if neither party received 50.1%. QVC also alleged that Viacom gave analysts inside information and claimed if neither side received 50.1%of Par’s outstanding stock today, then the cable programmer “would go forward with its offer, with the possibility of a reduced price.”

Behavior defended

A Viacom rep said those charges were “without merit” and defended its behavior throughout the auction process.

Paramount later Friday fired off another letter to QVC, saying it failed to answer the question of bidding violations. The studio agreed to look into QVC’s allegations of wrongdoing by Viacom but said so far the cable programmer had responded “positively” to discussions of the bidding rules.

U.S. stock exchanges shuttered early Friday due to inclement weather. By the close, QVC shares had gained $ 1.25 to $ 46.88 per share and its bid was valued at $ 87.33 per. Viacom Class B stock finished down $ 1.13 at $ 31.63 per. Paramount shares were unchanged at $ 76.88.

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