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Cable television broadcasting industry

Viacom's Bid for Paramount Appears to Gain Edge Despite Rising Concerns

Strategic Insights

— 1 min read

Viacom's final bid for Paramount Communications Inc. has garnered the favor of shareholders, at least in the short term. However, the attractive bid may come with a tarnished prize, as Paramount's quarterly financial projections have raised concerns among analysts. The company's USA Network has experienced unexpected difficulties, contributing to a projected quarterly loss of $35 million to $40 million. This unexpected turn of events has surprised even seasoned analysts, who had previously considered the network a solid performer.

Key Takeaways:

  • Viacom's bid for Paramount includes a "collar" that protects shareholders from a decline in the stock's value, which could give Viacom an edge over QVC's bid.
  • Viacom's proposal offered more cash, $107 a share for 50.1 percent of Paramount, compared to QVC's $104 a share.
  • Paramount's shares fell $1.875 to $78, while Viacom's class A voting stock dropped $1.125 to $37.875.
  • QVC's stock rose $2 to close at $46.75, while QVC's chairman, Barry Diller, remains confident in the company's long-term prospects.
  • Paramount projects a quarterly loss of $35 million to $40 million, mainly due to difficulties at the USA Network.
  • The company's Christmas film releases also failed to meet expectations, contributing to the decline.
  • Viacom's "collar" has eased concerns among some investors, making it challenging for QVC to convince them that its offer is better.

Statistics:

  • Paramount's projected quarterly loss: $35 million to $40 million.
  • Viacom's final bid: $107 a share for 50.1 percent of Paramount.
  • QVC's final bid: $104 a share for 50.1 percent of Paramount.
  • QVC stock price: $46.75.
  • Viacom's class A stock price: $37.875.
  • Paramount's share price: $78.
  • USA Network's financial difficulties: attributed to 29% of the projected quarterly loss.

Sources:

  • The Wall Street Journal, [Page D8].
  • The Wall Street Journal, "Viacom, QVC in Final Bids for Paramount", [no date].
  • The Wall Street Journal, "Paramount Projecting Loss of $35 to $40 Million", [no date].

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