Following a meeting of the board in New York yesterday morning, Paramount said it had agreed to hold discussions to evaluate aspects of QVC's dollars 9.5bn counter-offer, 'including regulatory restraints, the value of QVC stock and the certainty and time frame' of its merger proposal. At the same time, the board said Paramount 'is proceeding with its merger with Viacom'.
Viacom, for its part, said Paramount's announcement 'is consistent with our merger agreement,' and that the two parties still intended to complete their deal. It insisted it had no plans to increase its offer, pointing to 'the many questions raised by the QVC proposal and the activities' of its backers at Tele-Communications Inc, the US cable giant.
But the announcement is something of a setback for Paramount's chief executive, Martin Davis, who negotiated the friendly merger deal with Viacom and does not want to lose control of the group to QVC's chief executive, Barry Diller, who once ran its famous Hollywood studio.
The Paramount board, which is obliged to consider the higher QVC offer, is, however, expected to proceed slowly with its review, giving Viacom time to challenge the credibility of the hostile QVC offer, and to organise a stronger new bid if that fails.
Scepticism about QVC's chances of winning the bidding war could prove self-fulfilling, driving down its share price and thus reducing the value of the non-cash portion of its offer. This would considerably narrow the gap between the two bids.
But QVC, which last week provided the Paramount board with bank commitments for the dollars 3bn cash portion of the offer, let it be known yesterday that it is close to bringing two more partners, Bell South and Cox Enterprises, into its camp, contributing perhaps another dollars 1bn in cash to its bid.
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