The ongoing battle for Paramount Communications has again shifted from the boardroom to the courtroom.
Barry Diller’s QVC Thursday filed for a preliminary injunction to block Viacom’s tender offer for, and proposed merger with, Par until all impediments that QVC says have been imposed by the defendants to block its own tender offer and proposed merger are invalidated or waived.
According to documents filed Thursday by QVC with the Delaware Chancery Court: “Paramount is indeed for sale — but not to the highest bidder, and not for the highest price. There are two bidders; yet from the outset, the Paramount board has firmly resolved to deal with only one.”
The motion and amended complaint seek to build on an earlier suit filed by QVC on Oct. 21. Their goal is to restrain Viacom and Paramount from exercising lock-up provisions of their agreement, including $ 100 million in fees to be paid to Viacom if the merger is not consummated, as well as an option for Viacom to purchase up to 20% of Paramount’s common stock for $ 69.14 a share (worth another $ 250 million, according to QVC). QVC says these lock-ups have effectively shut out other bidders and were part of a plan by Paramount chairman Martin Davis to insure his tenure.
Further, QVC alleges that while it has sought time and again to meet with Paramount to discuss a merger, “the company has never once agreed to begin, or even to schedule discussions with QVC.” For this reason, QVC says Paramount’s board is in breachof its fiduciary duties.
The suit names as defendants Paramount, Viacom and Davis, as well as those Paramount directors who are not currently officers of the company (studio head Stanley Jaffe was not named in the suit).
Mergers and acquisitions experts said the motion was not unexpected, but were unsure if it would be granted. “What you do in these situations is fire all your guns and make it as tough as you can for the other side,” said one veteran M&A attorney who asked to remain anonymous.
“But the court is generally reluctant in these matters to interfere. The court is loath to look like it’s taking sides, unless there is something really egregious going on,” the attorney said.
For their parts, both Paramount and Viacom dismissed the suit as frivolous. “The suit is absolutely without substance and a deliberate distraction from the main event: our revised merger agreement with Viacom and the related tender offer,” said a Par spokesman.
Added Viacom: “The QVC lawsuit was and is absolutely without merit. We are proceeding toward the consummation of our transaction.”
QVC declined to comment further on the motion or the lawsuit. The latest speculation surrounding the home shopping network has it in discussions with telco Ameritech.
Wall Street seemed more interested in whether Bell South will emerge on its own as a bidder for Paramount. Sources say the company is waffling, even though its banker, Wasserstein Perella, is supposedly in favor of a bid.
There was also speculation that the company might team with Chuck Dolan’s Cablevision Systems and go with a joint bid (see story on page 6).
While Bell South isn’t talking, analysts said trading in the stock would seem to indicate that Wall Street is treating seriously the likelihood of a bid. Bell South gained 12.5 cents to close at $ 62.50. QVC remained flat at $ 57. Viacom’s Class A shares gained 12.5 cents to close at $ 58.375 while its Class B stock gained $ 1.375 to close at $ 53.375.
