Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, December 22, 1993 TAG: 9312220107
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Knight-Ridder Newspapers
DATELINE: LENGTH: Medium
The question was asked - and perhaps answered - as QVC's stock price Tuesday continued to fall in the face of the West Chester, Pa., cable-TV shopping network's apparent high bid for Paramount Communications Inc.
The value of QVC's latest bid for Paramount, announced late Monday, was $82.82 a share, or about $10.3 billion. The bid's value fell during the course of Tuesday because its stock price, traded on Nasdaq, fell $1.50 to $42 a share.
Rival bidder Viacom Inc. declined to reveal its bid; its previous offer was valued Tuesday at about $9.6 billion.
Paramount's board met Tuesday to consider the bids, but recessed until today without taking any action, a sign that the offers were close and further negotiations were likely.
Both companies have bid about $5 billion more than Paramount's overall market value prior to the movie and publishing company's Sept. 12 agreement to merge with Viacom.
"Even respecting all the perceived abilities of Mr. Diller, and understanding all the opportunities the new world of information highways and 500-channel TV-sets might mean to QVC, it's hard to accept that [Paramount] is worth $5 billion more than it was three months ago," said James M. Meyer, research director at Janney Montgomery Scott Inc. in Philadelphia.
In all, QVC's stock has lost 22 percent of its value since Sept. 20, when it announced its initial bid for Paramount, despite that company's merger agreement with Viacom.
Viacom also has seen its stock plummet during the bidding war. Since Sept. 12, the cable company's class A stock has lost 25 percent of its value on the American Stock Exchange. Those shares gained 62.5 cents Tuesday to close at $49.875.
Paramount shareholders, meanwhile, have seen the value of their stock increase by 21 percent since Sept. 12. Although Tuesday, Paramount closed down $1.625 a share at $80.375.
Analysts said it is normal for the stock of an acquiring company to decline prior to a merger, reflecting the cost of the deal. But the decline in QVC's stock reflects more serious concerns about the size of the bids for Paramount.
"The current fundamentals at Paramount just don't support that price. [The bids] have gone beyond [Paramount's] economic value," said Michael A. Kupinski of A.G. Edwards & Sons in St. Louis.
To be sure, Wall Street is not speaking with unanimity about the price for Paramount. Diller's track record as a former Paramount executive and the creator of the Fox Television Network has won him many fans from Wall Street to Hollywood.
And many analysts said Tuesday that they expected the bidding to climb even higher before the battle for Paramount is won.
Still, if QVC wins, it will face a daunting task in convincing Wall Street that it paid a reasonable price.
"Even if the management of the acquiring company can leverage the assets successfully, it will take some time for the market to recognize that value," Kupinski said.
Those assets are considerable. Paramount has a vast library of hit TV shows and movies that ought to gain value in the entertainment-hungry world of video-on-demand and 500-channel cable-TV systems. It also owns sports teams and publishing units.
"There are pieces of Paramount that one can argue are going to be worth more than they are now, Meyer said.
"But I'm not sure the syndication value of `Cheers' is suddenly going to be worth hundreds of millions more than it's worth now. The Knicks and the Rangers aren't going to suddenly be worth twice as much as they are now. And as to [Diller's] ability to be more successful in making hit movies, well that business has always been a hit-or-miss proposition. . . . Just bringing Barry Diller to Paramount doesn't mean there's going to be a new `Jurassic Park' every summer."
by CNB