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Viacom-B’buster foes change tack

Blockbuster shareholders withdrew their court effort Wednesday to block the video rental giant’s upcoming $ 1.25 billion investment in Viacom, but will instead try to prevent the merger itself.

Paramount stock, meanwhile, took a huge hit as Viacom announced completion of its cash tender offer for Paramount, closing down $ 27.88 at $ 48.13.

The drop reflects the fact that any shares still on the open market will get no cash and only securities when they are tendered.

Viacom will pay $ 107 cash per share on or about March 11 for almost 62 million Par shares, or 50.1% of the total shares outstanding. The remainder of the approximately 120.3 million tendered shares will be exchanged for a package of new securities.

As for Blockbuster’s investment in Viacom, Biggs & Battaglia lawyer David Finger said his clients — about a dozen individual and institutional Blockbuster investors — decided early Wednesday not to proceed with their appeal of a ruling that permitted the transaction.

Instead of trying to get more value for their shares, “we believe that our energies are better spent focusing on preparing for a preliminary injunction against the merger” itself, Finger said.

The Blockbuster shareholders had originally sought to scrap a separate “subscription” pact calling for Blockbuster to buy about 23 million Viacom Class B shares at $ 55 per share so that Viacom can fund the cash part of its merger with Paramount.

Many shareholders besides those involved in the case are furious that their holdings have lost about 16% since Jan. 1, dragged down by Viacom’s pricey Par deal. And that’s in the open market. The value of Viacom’s offer for Blockbuster has fallen to about $ 23.66 from $ 31 per as Viacom B shares have plummeted.

Viacom B closed Wednesday down 75 cents at $ 28. Blockbuster was off 50 cents at $ 25.75.

Several large Blockbuster investors have said they will vote against a merger with Viacom unless chairman Sumner Redstone sweetens his offer or Viacom B rises on its own. While Blockbuster chief exec H. Wayne Huizenga votes about 23% of the shares, independent directors will not be able to support the merger if banker Merrill Lynch decides the price is inadequate.

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