Viacom seduces Par

Paramount’s on-and-off love affair with Viacom Intl. Inc. is apparently on again after Par’s board Friday unanimously backed the cable programmer’s latest offer and scrapped its previous pact with QVC Network.

But Wall Street sources said that while QVC chief Barry Diller may be temporarily down, he’s not out. Even before the board meeting began Friday, talk circulated that Diller was consulting arbitragers and fund managers — who now hold most Par stock — on how to improve QVC’s bid.

Last Tuesday, Viacom boosted its offer by $ 2 per share to $ 107 per share for 50.1% of Par’s outstanding common stock plus guarantees of a minimum $ 48 value for the Class B shares included in the second tranche, or back end.

QVC’s bid, made last month, offers $ 92 a share for 50.1% of Par’s outstanding common stock with an unguaranteed package of securities in the back end.

As of Friday’s close, analysts valued QVC’s bid at $ 85.52 a share (a total $ 10.1 billion) against Viacom’s $ 80.69 ($ 9.6 billion). QVC shares were unchanged Friday at $ 44 and Paramount shares added 25 cents to $ 80. Viacom Class A shares were flat at $ 40 and Class B shares rose 13 cents to $ 37.75.

Keeping options open

But Par’s board, which decided in less than three hours that Viacom’s offer represents the best value to shareholders, is keeping its options open. It will consider any bids offered by Feb. 1 although both tenders expire Jan. 31. Viacom made a statement late Friday saying it was pleased with the decision. QVC had no comment.

Traders said earlier Friday that several professional investors had bought Viacom shares. The conventional wisdom until now has maintained that the party who wins Paramount actually loses, because of the deal’s colossal expense.

Investment pundits now say that thinking has changed, since the proposed combination of Viacom with Paramount and Blockbuster Entertainment would result in cash flow of an estimated $ 1.4 billion that could sustain any debt taken on to ensure the guaranteed $ 48 per share three years from now.

“Which is the better deal? Viacom is because it has a collar that supports the price. QVC does not,” PaineWebber analyst Christopher Dixon said. “That’s why the arb community is saying, ‘Hmm. that sounds good to me.’ ”

One source close to QVC, however, continued to call Viacom’s bid “dilutive,” and noted that since Sumner Redstone’s latest overall bid is still lower than Diller’s (based on Friday’s prices), “clearly the bid they made Jan. 7 was just designed to buy time.”

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