Paramount may turn to independent board to weigh rival bids


NEW YORK -- Paramount Communications Inc.'s board, faulted in court for its handling of QVC Network Inc.'s takeover offer, probably will convene a committee of independent directors to weigh competing bids, investment bankers and traders said yesterday.

"If I was the board, I would say I'd better find an exit strategy," said Michael Madden, an investment banker at Kidder, Peabody & Co. "This thing is getting out of hand."

Independent committees consist of board members who don't belong to management. They are convened to ensure a level playing field among bidders in a takeover contest.

Wednesday, Delaware Chancery Court Vice Chancellor Jack B. Jacobs blocked the media and entertainment company's chief defenses against QVC's hostile $10.85 billion offer.

Judge Jacobs said in essence that Paramount's board must consider all bids. The decision helps QVC at the expense of Viacom Inc., which wants to acquire Paramount for about $9.87 billion.

Paramount's offices were closed yesterday. Jerry Sherman, a spokesman, said he didn't know whether the board was considering an independent committee.

Shares of Paramount, the third most active issue in U.S. composite trading, dipped 25 cents, to $79.875, as 2.24 million changed hands. QVC stock dropped 12 1/2 cents, to $47.625 on volume of 325,200 shares. Viacom class A and class B shares fell 87 1/2 cents, to $49.75, and 25 cents, to $44.25, on volume of 12,900 and 14,900 shares, respectively.

Boards typically convene independent committees to evaluate management-led buyout proposals. Paramount and Viacom advisers have said an independent committee isn't necessary because management isn't trying to acquire the company.

The company's outside board members include Lawrence Small, president and chief operating officer of the Federal National Mortgage Association; J. Hugh Liedtke, chairman of Pennzoil Co.; and George Weissman, former chairman of Philip Morris Cos.

Paramount is appealing Judge Jacobs' ruling. The Delaware Supreme Court said yesterday that it will decide Monday whether to accept the appeal.

Lawyers for both sides indicated that the high court would accept the appeal. Viacom, in a statement, said the court indicated that it would hold a hearing Dec. 9. Bankers said they didn't know whether Paramount would convene an independent panel before any review is done.

People close to both sides say they expect the bidding contest to remain on hold until Delaware's highest court rules on the appeal.

QVC, a West Chester, Pa.-based home shopping channel, is offering $90 a share in cash for 51 percent of Paramount and QVC stock for the other 49 percent. Its offer is higher than the bid from Viacom, a New York-based cable and entertainment programming company, which is offering stock for the shares it doesn't buy in the tender offer.

The cash and stock offer from QVC is valued at $87.11 a share, or about $10.85 billion, based on today's stock prices. Viacom's offer is valued at $79.25 a share, or about $9.87 billion.

Paramount's board has favored Viacom's offer and has accepted advice from Chairman Martin Davis, lawyers and bankers to reject QVC's advances, said Eric Longmire, an arbitrageur at Wyser-Pratte & Co.

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