The marriage of Paramount and Viacom, which Sumner Redstone and Martin Davis swore would never be torn asunder, was annulled Wednesday by the Paramount board of directors.
In a stunning reversal of the position it’s held for the last 3 1/2 months, the board signed a merger agreement with hostile bidder QVC, terminated its pact with Viacom and recommended that stockholders accept QVC’s $ 10.2 billion offer.
But whether QVC will actually make off with the bride remains to be seen. “All the board’s recommendation shows is that Viacom has been unable — up to this point — to pull together a higher offer,” said a money manager. “But that doesn’t mean they won’t. If they do, we’re back to square one.”
That’s because under bidding procedures established by the Paramount board earlier this month, the higher approved offer (currently QVC’s) must remain open for 10 business days, during which time the lower bidder (currently Viacom) can increase its offer.
QVC’s offer is now set to expire at midnight Jan. 7. If Viacom does make a higher bid before then, the board can tear up its agreement with QVC, sign a new merger agreement with Viacom and recommend that deal to shareholders. The timing process would then start all over again, with QVC having 10 business days to better Viacom’s bid. As of Wednesday, QVC said about 13.7 million shares had been tendered to its offer.
Viacom has repeatedly asked the board for more time to come up with a better offer (its requests were refused) and sources said backers NYNEX and Blockbuster Entertainment are negotiating ways to increase their investments in Viacom to help it sweeten its $ 9.7 billion bid.
Some believe Viacom could weigh in with a higher bid as early as today, but Monday looks much more likely in light of the holiday.
While the reversal appears a victory for shareholders of Paramount, the board’s action represents a stunning defeat for Par topper Davis. The Par chairman was determined to consummate a merger with Viacom despite the higher QVC bid; instead he might now see his company pass to adversary Barry Diller.
While Davis has historically ruled the board with an iron fist, that sway apparently dissolved under the intense scrutiny of the Delaware Supreme Court, which earlier this month admonished the board for not considering QVC’s offer and forced Paramount to conduct an auction.
Despite the apparent defeat, a source close to Paramount said Davis phoned Diller after the agreement had been signed to congratulate him. “He (Davis) wished him (Diller) well and said he was happyto assist in any way he can should he be the victor.”
Not taking the 5th
Davis and Redstone have backed Par’s proposed fifth network bid in association with partner Chris-Craft Television. But Diller has questioned the worth of another broadcast network and threatened to sell the Par-owned stations that are now committed to the weblet if he wins control of the studio.
Still, Chris-Craft is entitled under the agreement to carry the programming venture forward without Par (Daily Variety, Dec 10).
Sources involved with the Par/Chris-Craft effort have expressed confidence that Diller will change his mind about the weblet.
Trading of the Paramount and Viacom stocks was halted early Wednesday afternoon but resumed shortly before the close. Paramount lost 62.5 cents to close at $ 79.625. Viacom’s Class A and Class B stocks — which were both up more than $ 4 a share stock at midday — saw those gains largely diminished by the close; the Class A gained $ 1.125 to finish at $ 51 while the Class B gained 87.5 cents to close at $ 46. QVC — which also was halted but did not resume trading before the close — slipped 75 cents to close at $ 41.75.
While Viacom would not comment on the most recent developments in the takeover battle, the company did issue a statement relating to press reports that Phyllis Redstone, wife of the Viacom chief, sued for divorce last month but withdrew the suit three weeks later.
Because she conceivably would be entitled under Massachusetts divorce law to half of everything acquired during their 46-year marriage, there were questions of what effect a divorce would have on Redstone’s control of Viacom. Redstone personally owns 84% of the voting stock and his National Amusement’s holds a 76% overall stake.
But George S. Abrams, personal attorney for the Redstones, said that “the legal arrangements involving the stock holdings, including family trusts, would make such a result impossible. In any event, there is no divorce action and repeated references to these matters amount to no more than malicious harming of innocent people.”