NEW YORK -- It was a $2.2 billion gap that refused to go away, and in the end, even the board of Paramount Communications Inc. could no longer ignore it.
After a remarkably brief 20-minute meeting, Paramount's board said yesterday that it would begin exploratory discussions with QVC Network Inc., the home shopping company that has presented it with an unwelcome $9.5 billion buyout offer.
That offer easily beats a competing friendly merger agreement with Viacom Inc., currently valued at $7.3 billion.
Despite the gesture, Paramount's board also signaled that its ultimate consent to a QVC takeover was far from given. It instructed its advisers to focus on three crucial areas where the QVC bid might be vulnerable: regulatory issues, the value of QVC's stock and the certainty and time frame of the transaction's being completed.
Some investors and analysts said the board was stalling to give Viacom
time to return with a higher bid and to convey the appearance of fairness.
"There is clearly a stall tactic going on, and the question is why and what is the next step," said Mario Gabelli, an investment manager and a major shareholder in Paramount.
Paramount's board would have had even more explaining to do if it had not considered the QVC bid at all. Paramount's chairman, Martin S. Davis, after all, had once argued that Time Inc. had wronged its shareholders by spurning a cash bid from Paramount that was vastly superior to the one from Warner Communications that Time ultimately accepted.
Mr. Davis favors Viacom as a potential partner, and he had apparently been on the phone with board members, seeking their help in slowing down the QVC negotiations, if they could not be averted altogether.
The board was apparently in accord, and at yesterday's meeting, which one executive described as "plain vanilla," the 15-person board agreed to authorize "informational" discussions with QVC.
If the issues all turn out to be routine ones, as one executive close to Paramount's board believes, then Viacom would have to raise its bid towin back the deal it thought it had already won.
Viacom's chairman, Sumner M. Redstone, is apparently not yet ready to make that move.
In a statement issued yesterday, Mr. Redstone said that "Paramount will now be able to address directly the many questions raised by the QVC proposal and the activities of the Malone group," referring to John C. Malone, the cable entrepreneur who controls Liberty Media, the largest investor in QVC.
A centerpiece of Mr. Redstone's assault against QVC is a lawsuit he has filed contending that companies controlled by Mr. Malone engage in anti-competitive practices that would intensify if QVC merged with Paramount.
Both sides have sought additional investors to provide them with more money if they should increase their offers. Viacom already has a war chest of $1.8 billion from Blockbuster Entertainment Corp. and NYNEX Corp.
QVC, though it is already in the lead, is also preparing a larger cash arsenal that it could call on, if necessary. QVC was in talks over the weekend and yesterday with BellSouth Corp. and Cox Enterprises about an investment estimated to be about $1 billion, according to several executives with knowledge of the talks.
One of these people said that issues of control, particularly with BellSouth, had stalled those negotiations. "They don't want to be a passive investor," he said. "Just how active they will be is the issue."
However, a second executive said he saw control as a side issue because in his view it was clear that Barry Diller, the chairman of QVC, would run the operations.