After round-the-clock negotiations that finally ended yesterday afternoon, BellSouth Corp. agreed to invest $1.5 billion to back QVC Network's bid for Paramount Communications.
But just as QVC made a new alliance, it lost an old one. The Federal Trade Commission, which has been investigating antitrust issues in QVC's proposed hostile takeover of Paramount, has insisted that QVC sever its ties with Liberty Media, its largest shareholder, if it wants a green light from the government.
If it wins Paramount, QVC has promised to buy out Liberty's 15.6 percent stake for roughly $500 million, if Liberty cannot get a better price in the open market.
That means QVC will have $1 billion of new BellSouth money. That might help QVC Chairman Barry Diller raise his bid for Paramount -- an action he is expected to take as early as today, according to two executives close to the negotiations.
The merger partner preferred by Paramount Chairman Martin S. Davis is Viacom Inc.
Viacom Chairman Sumner Redstone increased his own offer last week for the second time, to $10.1 billion. The proposal includes roughly $5.1 billion in cash and the balance in stock.
That leaves Mr. Diller trailing, because he has only $4.8 billion in cash on the table. But several industry experts said last night that the new BellSouth investment would allow QVC to raise the crucial cash portion of its bid to $5.8 billion.
Mr. Diller did not say yesterday whether or when he would increase his bid. But QVC goes to court Tuesday to ask the federal government to remove some anti-takeover provisions that Paramount's board has put in place.
Several industry analysts said Mr. Diller's legal argument would be far stronger if he raises his bid before then, since he could allege that even with a stronger bid, he was not being treated fairly.
The government has questioned the QVC bid because of the involvement of Liberty Media, the cable programming company controlled by cable entrepreneur John C. Malone.
Mr. Malone also controls the nation's largest cable operator, Tele-Communications Inc. and has agreed to sell both entities to Bell Atlantic, thus widening his power in the telecommunications industry and sending off antitrust alarms.
But several executives close to the talks with the FTC said yesterday that the key factor that held up the talks was Mr. Malone's reluctance to sell his stock.
Originally, Mr. Malone wanted to keep the stock, and its votes. Then he was willing to keep the stock, even if it was placed in a nonvoting trust. But the government insisted that he sell, and Mr. Malone resisted, according to two executives with knowledge of the discussions.
And at the last minute, Cox Enterprises, the Atlanta-based cable
company that is an investor in QVC, raised more issues and slowed the closing because the company had not been informed of the latest developments, these executives said.
If QVC wins Paramount, BellSouth would be the largest shareholder of the QVC-Paramount merged company, with about 14 percent of its stock. BellSouth would be one of three principal shareholders and would have three seats on the board. Comcast Cable and Mr. Diller would continue as the other major shareholders, each with about 5 percent of the new company.
BellSouth Chairman John Clendenin said yesterday that "What this really starts to establish very clearly is the start of a long partnership that leads us to capitalize on QVC's strengths as we move into the multimedia world."
Mr. Diller said yesterday that despite Liberty's withdrawal as an owner of QVC, Tele-Communications had agreed to continue carrying QVC's home-shopping channel and to offer its coming service, Q-2, in 10 million homes.