Paramount Communications may be slipping away from QVC Network chief Barry Diller.
Friday, Paramount's board endorsed a rival takeover offer by MTV owner Viacom. Despite the decision, Paramount shareholders get to choose which bidder to tender - commit to sell - their shares to.
On top of the endorsement, the board said the long bidding war must end when the rival offers expire at midnight Feb. 14 - whether or not either suitor has attracted the required 50.1% of Paramount shares. Just how many shares a bidder will have to get to win was unclear. Paramount has proposed - and Viacom has accepted - a plan in which the winner would be the bidder with the most shares, as long as it had 40%.
QVC appeared to be balking at that plan over the weekend. No wonder: The change would favor Viacom, which now has more support on Wall Street - though perhaps not enough to attract 50.1%. Without the change, another round of bidding probably would be needed if neither bidder got 50.1%. But Paramount's board wants to end the nearly five-month takeover battle. The contest may already be taking a toll on Paramount earnings: Last week, Paramount said it would report a loss for the quarter ended Jan. 31.
Viacom's offer is considered better than QVC's, though it is worth less at Friday's stock prices. Viacom is offering cash and Viacom securities worth about $ 82 a share, or $ 9.7 billion; QVC, cash and securities worth about $ 86 a share, or $ 10.2 billion.
But many investors - especially short-term traders - prefer Viacom's bid because it is less vulnerable to stock market swings: It includes more cash and a provision to compensate Paramount shareholders if Viacom stock performs poorly. QVC offers no such protection against a poor stock performance.
But QVC is pushing its bid on Wall Street, saying Viacom's offer provides no protection when Viacom Class B stock is below $ 36. (Friday, Viacom B closed at $ 32 7/8.) Still, the odds may favor Viacom. "QVC does seem to have a problem," says industry analyst Dennis McAlpine of Josephthal Lyon & Ross. "If I were QVC, I might start shopping for something else."
