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Viacom ‘collars’ bid

Sumner Redstone is preparing to go over the top at least one more time in the trench war for Paramount Communications.

Sources told Daily Variety that Viacom will announce as early as today a revised bid for the entertainment behemoth that will top QVC Network’s latest bid in overall value.

To do that, Viacom is expected to unveil an offer that will include a “collar”– a device that will guarantee the value of the equities that make up the non-cash portion of its bid.

Both Viacom’s and QVC’s offers have been at the mercy of Wall Street the last four months as trading dictated the overall value of any bid; the stock prices of both QVC and Viacom have plummeted since September.

While Viacom announced a tender offer on Jan. 7 that included $ 105 cash for 50.1% of Paramount’s shares, that bid was not accepted by Paramount’s board because the overall value still fell below QVC’s offer, which guarantees just $ 92 cash for 51% of Paramount’s shares.

Based on Monday’s closing stock prices, Viacom’s deal was valued at $ 77.23 a share, or about $ 9.2 billion, while QVC’s stood at $ 85.18, or about $ 10 billion.

While details of the new bid were still hazy late Monday, Wall Street sources said they expected Viacom to increase and guarantee the value of the equities package or “back end” so that the overall value of its offer would be above QVC’s bid.

If Viacom B shares were to decrease in value after the bid is announced — highly likely if Viacom is seen as a front runner — Viacom could increase the amount of Class B so that the overall value would remain above QVC’s. (Viacom employed a similar collar in its proposed merger with Blockbuster Entertainment.)

Sources also noted that Viacom could once again hike the cash portion or the amount of preferred stock included in its deal, although neither option was considered likely.

Sources said Viacom executives spent much of Monday huddled with their financial advisers and at one point were prepared to announce a new bid in the evening. It was unclear why the company held off, but sources speculated it was because they feared the announcement would be lost in the flood of news coverage of the Southern California earthquake.

Viacom could not be reached for comment.

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