QVC Network and Viacom fought to a draw in the slugfest for Paramount Communications, submitting "final" bids Tuesday that analysts described as too close to call.
The stalemate increases the likelihood of another round of bidding, prolonging a takeover battle nearly 5 months old.
Viacom's offer may have a slight edge, but investors are likely to have to monitor the stock prices of both bidders this week to determine the best offer. "It's not over, unfortunately," says Jessica Reif, analyst at Oppenheimer & Co. "The bids are virtually identical."
Under rules established by Paramount, the bidders were to make their final, best bids Tuesday. On the table:
QVC, a home-shopping service, offered $ 104 a share cash for 50.1% of Paramount, plus a package of QVC securities for the rest. The blended value of the cash and securities is about $ 86 a share, or $ 10.2 billion, at Tuesday's closing stock price.
Viacom, owner of MTV, offered $ 107 a share cash for 50.1% of Paramount, securities for the rest. The blended value of Viacom's offer is about $ 83 a share, or $ 9.8 billion.
QVC's bid looks higher, but:
Viacom's offer is less vulnerable to swings in its stock price. It contains more cash and includes some protection against a drop in Viacom Class B non-voting stock - a major component of Viacom's offer. QVC's offer contains no such protection against swings in its stock, although QVC backer BellSouth has agreed to support QVC's stock price by buying $ 500 million worth of QVC shares at $ 42 each.
QVC's stock is likely to fall further than Viacom's if it wins Paramount. Whichever bidder wins probably will see its stock fall because of worries about the steep cost of acquiring Paramount. But PaineWebber analyst Craig Bibb figures QVC stock would drop to $ 36 1/2 (down 18% from its $ 44 3/4 Tuesday close) if it won, and Viacom B stock would drop to $ 31 a share (down 9% from $ 34 1/8 Tuesday) if it won. At those prices, QVC's offer would be worth $ 80.17 a share; Viacom's $ 80.36, Bibb says.
Paramount's board will meet this week to evaluate the bids. Shareholders, not bound by the board's endorsement, can tender their shares to either Viacom or QVC.
"I can't say you have a clear-cut winner. My sense is they'll take another shot at it," says Mario Gabelli, whose money management firm owns a sizable Paramount stake. "QVC and Viacom are playing a game of (information) highway 'chicken.' "
Bibb says: "I will go to bed tonight praying this is the end. But I don't think it is."
