Viacom lifts takeover bid for Paramount by dollars 700m: Increase still leaves package well below advertised size

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The Independent Online
VIACOM, the US cable television company, yesterday added some dollars 700m to the value of its bid for Paramount Communications and included some guarantees against a decline in its share price.

But Viacom's new bid is still worth considerably less than the dollars 10.5bn at which it is being advertised. It is also, by some estimates, shy of the average dollars 85 a share being offered by its rival bidder, QVC Network. Both bidders, however, have the opportunity to raise their offers again before the final deadline of 1 February.

Paramount said its directors would meet later this week to consider the revised Viacom bid.

Viacom once again appears to be banking on the appeal of the cash portion of its offer, which will now pay those who tender the first 50.1 per cent of Paramount shares dollars 107 apiece - dollars 15 more than would QVC's offer. But the all-share 'back-end' portion, which would go to holders of the remaining shares, is worth considerably less than QVC's.

Viacom's new offer does, however, guarantee sellers that their shares will be worth a minimum of dollars 48 each if its share price were to fall, a near-certainty if it wins the takeover battle.

QVC's current offer contains no such guarantees, but analysts note that Viacom's so-called 'contingent value rights' would not protect against a deeper decline in its share price.

In midday trading yesterday, Viacom's shares were down 5 8 at dollars 381 2 , barely within the range covered by its new guarantee.

The 'blended' value of Viacom's new package - averaging the cash and share portions of its bid - is about dollars 6 a share higher than its previous offer, which was announced just an hour before the last bidding deadline on 7 January. That announcement kept the long-running process alive another 10 days, despite failing to top the QVC bid.

QVC's shares also declined yesterday, lowering its total offer to less than dollars 10bn and leaving the two offers almost equivalent.

But because of arcane bidding rules established by Paramount directors, it now seems unlikely that either party will present its best offer until the final deadline. Analysts note that both parties still have the financial capacity to increase their bids - QVC because of its backing from Bellsouth, and Viacom because of its recently announced merger with Blockbuster Entertainment.

Shares of Paramount, for their part, rose 11 2 on the news of the new offer to dollars 791 8 , just a few dollars less than their high for the year.

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