Amadeusz Juskowiak

Talking pointviacom international via

A bidding war for Viacom International Inc one of the largest US entertainment companies pitted a management group and other investors against National Amusements Inc a closely held theater operator

Both sides raised their bids over the weekend A source close to the management side insisted that timing was on his side He said if outside directors approve the management proposal a merger plan could be put to a vote of shareholders with proxy material going out late this week It would take 20 days from the day we mail said the source

The source predicted National Amusements controlled by investor Sumner Redstone would need half a year to complete a tender offer because of the regulatory approvals that must accompany any change in control of Viacoms broadcast licenses and cable television franchises

Redstone was not available for comment

Some of Wall Streets arbitrage players said it was a rare situation that could only be enjoyed a true bidding war One said Redstone could begin a tender offer whenever he wanted and if enough people were convinced his proposal was superior to the Viacom management plan he would have a chance to win

The independent directors of Viacom were called into a meeting today Word on a decision was expected early tomorrow

Viacom shares climbed 212 to 5038 by midafternoon One major Wall Street firm issued a sell recommendation We think were at the end now in terms of bidding said the firms arbitrageur who spoke on condition he not be identified

Both Redstones proposal and the management proposal would create a restructured company heavily leveraged with debt The management plan would result in a balance sheet with about 25 billion dlrs in debt and nearly 500 mln dlrs in preferred stock convertible into 45 pct of the common stock

Redstones newest proposal offers holders 42 dlrs in cash a fraction of a share of exchangeable preferred stock with a value of 750 dlrs and onefifth of a share of common stock stock of Arsenal Holdings representing 20 pct of the equity interest in the restructured Viacom One arbitrageur calculated the equity in the Redstone plan was worth 250 dlrs making the total package worth 52 dlrs per share

Management offered 3850 dlrs in cash exchangeable preferred stock worth 850 dlrs and a fractional share of convertible preferred The arbitrageur said the equity portion was worth about 400 dlrs for a total of 51 dlrs

Redstones newest plan raised the amount of interest he would pay on the cash portion of his offer for every day beyond April 30 that a merger with Arsenal is not consummated The plan calls for intest to be paid at an annual rate of nine pct during May and 12 pct thereafter Previously Redstone offered eight pct interest

Other arbitrageurs said both Redstone and the management group led by president and chief executive Terrence Elkes were offering high prices Redstone really wants to own the company one said Another said management seemed to have the edge on the timing issue

Redstones company owns 196 pct ov Viacoms 35 mln shares

A Wall Street analyst said it was hard to determine what the equity in the newly leveraged company would be worth He noted as an example that new stock in FMC Corp FMC which adopted a highly leveraged structure last year inititally traded at 1250 dlrs per share dipped to nine dlrs and is now just over 30 dlrs

Last week Viacom reported fourth quarter earnings fell two two cts per share from 23 cts The company said interest costs from several acquisitions affected results

Shares of Warner Communications Inc WCI rose 78 to 3118 Analysts noted Warner owns warrants to purchase 325 mln Viacom shares at 35 dlrs and another 125 mln shares at 3750 dlrs

Chris Craft Industries CCN which owns a stake in Warner rose 114 to 2234

Viacom was created in 1970 and spun off from CBS Inc CBS The company has 940000 cable television subscribers operates nine satellite television services and owns television and radio stations It is one of the largest distributors of films and other programs for television

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