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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
(AMENDMENT NO. 23)
PURSUANT TO SECTION 14(D)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
SCHEDULE 13D
(AMENDMENT NO. 24)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PARAMOUNT COMMUNICATIONS INC.
(Name of Subject Company)
VIACOM INC.
NATIONAL AMUSEMENTS, INC.
SUMNER M. REDSTONE
BLOCKBUSTER ENTERTAINMENT CORPORATION
(Bidder)
COMMON STOCK, $1.00 PAR VALUE
(Title of Class of Securities)
699216 10 7
(CUSIP Number of Class of Securities)
PHILIPPE P. DAUMAN, ESQ.
VIACOM INC.
1515 BROADWAY
NEW YORK, NEW YORK 10036
TELEPHONE: (212) 258-6000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
STEPHEN R. VOLK, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
TEL.: (212) 848-4000
ROGER S. AARON, ESQ.
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
TEL.: (212) 735-3000
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Page 1 of Pages
Exhibit Index on Page
This Amendment No. 23 to the Tender Offer Statement on
Schedule 14D-1 and Amendment No. 24 to Schedule 13D (the
"Statement") relates to the offer by Viacom Inc., a Delaware
corporation ("Purchaser"), to purchase shares of Common Stock,
par value $1.00 per share (the "Shares"), of Paramount
Communications Inc., a Delaware corporation (the "Company"), at a
price of $105 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in Purchaser's
Offer to Purchase dated October 25, 1993 (the "Offer to
Purchase"), a copy of which was attached as Exhibit (a)(1) to
Amendment No. 1, filed with the Securities and Exchange
Commission (the "Commission") on October 26, 1993, to the Tender
Offer Statement on Schedule 14D-1 filed with the Commission on
October 25, 1993 (the "Schedule 14D-1"), as supplemented by
the Supplement thereto dated November 8, 1993 (the "First
Supplement") and the Second Supplement thereto dated January 7,
1994 (the "Second Supplement") and in the related Letters of
Transmittal.
Capitalized terms used but not defined herein have the
meanings assigned to such terms in the Offer to Purchase, the
First Supplement, the Second Supplement and the Schedule 14D-1.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE SUBJECT COMPANY
Item 3(b) is hereby amended and supplemented as
follows:
On January 12, 1994, Purchaser's legal advisor delivered to
the Paramount Board a letter that concerns the Offer and which responds
to certain statements made by QVC Network, Inc.'s legal advisor in a
letter, dated January 11, 1994, sent by such advisor to the Paramount
Board. A copy of the letter to the Paramount Board from Purchaser's
legal advisor is filed as Exhibit (a)(52) to the Schedule 14D-1 and
is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
Item 11 is hereby amended and supplemented to add the
following Exhibit:
99(a)(52) Letter, dated January 12, 1994, from Purchaser's
legal advisor to the Paramount Board
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
January 12, 1994
VIACOM INC.
By /s/ PHILIPPE P. DAUMAN
...................................
Philippe P. Dauman
Senior Vice President, General
Counsel and Secretary
*
...................................
Sumner M. Redstone,
Individually
NATIONAL AMUSEMENTS, INC.
By *
...................................
Sumner M. Redstone
Chairman, Chief Executive
Officer and President
*By /s/ PHILIPPE P. DAUMAN
...................................
Philippe P. Dauman
Attorney-in-Fact under Powers
of Attorney filed as Exhibit (a)(36)
to the Schedule 14D-1
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
January 12, 1994
BLOCKBUSTER ENTERTAINMENT CORPORATION
By /s/ STEVEN R. BERRARD
...................................
Steven R. Berrard
President and
Chief Operating Officer
EXHIBIT INDEX
PAGE IN
SEQUENTIAL
EXHIBIT NUMBERING
NO. SYSTEM
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99(a)(52) Letter, dated January 12, 1994, from Purchaser's
legal advisor to the Paramount Board
[SHEARMAN & STERLING]
January 12, 1994
The Board of Directors
Paramount Communications Inc.
15 Columbus Circle
New York, NY 10023
Ladies and Gentlemen:
Yesterday's letter from Wachtell Lipton, on behalf of QVC,
to the Paramount Board was a transparent attempt to tilt the playing
field in its favor and to eliminate the ability of Paramount's
stockholders to make an informed choice between the Viacom and QVC
offers.
On January 7, Viacom increased the cash price of its tender
offer to Paramount stockholders by over $1.1 billion, or more than
$800 million more in cash than under QVC's offer. In full
compliance with the bidding procedures agreed to by Paramount,
Viacom and QVC, and as required by federal securities laws, Viacom
also extended the expiration date of its tender offer until January
21. Now QVC, through a disingenuous press campaign and by seeking
inappropriately to pressure you, is seeking to change the rules to
suit its own purposes.
Viacom's January 7 proposal represents in Viacom's opinion a
substantial improvement for Paramount stockholders. Viacom
increased the cash in its first step tender offer from $85 to $105
per share, or by over $1.1 billion, while reducing the value (based
on January 6 closing prices) of the common stock offered in the
second step by $900 million. This represents an improvement in the
blended value of the transaction, based on market prices, of
approximately $200 million, or $1.60 per share. This was
accomplished by agreeing to sell Blockbuster approximately 22.7
million shares of Class B Common Stock at $55 per share, reflecting
Viacom's and Blockbuster's view of the unaffected trading value of
the Class B Common Stock, and providing to Paramount shareholders
the benefit of the increased cash value of $55 per share paid by
Blockbuster. Equally important, Viacom dramatically increased the
certainty of the value of the consideration offered in the
transaction by increasing the cash component of the blended value,
based on market prices, from about 55% to about 65%. This reduces
the
2
impact of short-term and deal-influenced price fluctuations on
the overall value of the transaction. In addition, the
preferred stock remained in place and in Viacom's view should
benefit from the strengthening of Viacom's balance sheet and
diversification of cash flows to be realized by combining
Viacom, Blockbuster and Paramount.
In addition to the specific changes to the offer
outlined above, Viacom and Blockbuster agreed to merge,
creating a premiere entertainment company which Viacom believes
will significantly enhance the value to Paramount of merging
with Viacom. Indeed, it is clear to Viacom that the
combination of the three companies will create an even more
diversified company than the Viacom and Paramount combination
considered alone, with greater financial flexibility and
stability of cash flows and the resources necessary to enable
the combined companies to continue to compete successfully in
the quickly evolving entertainment industry. A
Viacom-Blockbuster-Paramount combination is in Viacom's view an
international powerhouse which should ultimately be reflected
in shareholder value.
Viacom firmly believes that its current proposal to
acquire Paramount is demonstrably superior to QVC's proposal.
Attached to this letter is Smith Barney's summary analysis
supporting this conclusion. Viacom believes that its Class B
Common Stock currently is significantly undervalued, and that
calculating the value of its offer for Paramount based on
current trading values therefore significantly understates its
inherent value. Viacom also believes that the value Paramount
stockholders will ascribe to the Viacom proposal should not be,
and ultimately will not be, determined based upon trading
values created by short-term trading interests, the superficial
press analyses on which QVC prefers to rely, or QVC's campaign
of disinformation. Rather, Viacom believes that stockholders
will assess (and that the Board in the exercise of its
fiduciary responsibilities should also assess) Viacom's offer
based on the higher percentage of cash offered and an
assessment of the likely long-term trading values of Viacom's
and QVC's securities on an unaffected basis following
completion of the respective transactions. Viacom is confident
that stockholders, once they understand the facts, will
conclude that Viacom is offering superior overall value.
Accordingly, it is ludicrous for QVC to suggest that
Viacom's January 7 offer was made primarily or otherwise to
extend the expiration date of QVC's offer in violation of the
agreed bidding procedures. In any event, Viacom's management
has confirmed to me unequivocally that this was not the case.
3
QVC claims that Viacom's announcement of its offer on
January 7 was "abusive and misleading," because it was
announced on Friday afternoon and because the proposal is
"front-end-loaded".
QVC's rhetoric aside, it is important to set the
record straight:
1. The bidding procedures were agreed to by each of
Viacom and QVC and, as the Board is aware, were based
primarily on the procedures requested by QVC.
2. Under the bidding procedures agreed to by QVC,
Viacom was entitled to raise its offer at any time up until
midnight on January 7, in which event QVC was required to
extend its offer. In fact, Viacom announced its offer
immediately after finalizing its agreements with
Blockbuster, following several days of around-the-clock
negotiations. Viacom has complied fully with the bidding
procedures.
3. QVC complains that Viacom's offer is
"front-end-loaded." In fact, Viacom and QVC are offering
cash for the exact same percentage of shares of Paramount
(50.1% of the outstanding shares, plus exercisable
options). No doubt it concerns QVC that by offering cash
for the same percentage of shares as QVC, Viacom has
illustrated the significant difference in the cash offered
under the two proposals. The cash advantage afforded to
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Paramount stockholders by the Viacom proposal is $105
compared to $92 for 50.1% of the Paramount shares, or
$52.50 compared to $46 per share considered on a blended
basis. The Paramount board, in establishing the bidding
procedures, expressed a preference for cash. QVC itself
previously touted its cash advantage. We believe
Paramount's stockholders will now find the cash
differential in favor of Viacom to be compelling, given the
certainty of the value of cash as compared to the recent
deal-driven volatility in the trading values of the
securities offered in the two transactions.
4. The Viacom offer is not coercive. The proration
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rules of the offer, when combined with the "pourover"
provisions of the bidding procedures, ensure that all
shareholders will have a full opportunity to tender into
the winning offer and participate in the cash portion of
the transaction. We would remind the Board that QVC
specifically proposed the pourover provisions as a method
of ensuring that neither offer would be coercive.
4
5. QVC contrasts its conduct under the bidding
procedures with Viacom's by claiming it submitted a
"substantially increased bid on December 20..." However,
we would point out to the Board that the $2 per share cash
increase in QVC's December 20 offer, misleadingly ascribed
to its not paying Viacom's $100 million termination fee, in
fact primarily resulted from its slipping in a reduction of
its minimum condition from 51% to 50.1% (freeing up
approximately $100 million in cash). On January 7, Viacom
simply matched QVC's minimum condition, to allow Paramount
stockholders to compare "apples to apples".
Based upon its mischaracterizations of Viacom's
January 7 offer, QVC urges the Board to declare that Viacom's
offer is in violation of the Exemption Agreement, so that
Viacom would no longer be entitled to the rights it would
otherwise have under that agreement. QVC also seeks other
unilateral changes to the bidding procedures, changes which we
can only assume it believes will increase the likelihood that
it will prevail with its offer. In effect, QVC is seeking to
have itself declared the "winner", and even refers to its
"rightful victory".
However, the issue is not QVC's "right" to victory,
for it has no such "right" independent of the Paramount
stockholders' best interests. The real issue is whether the
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Paramount stockholders will be permitted to choose which offer
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is superior, as contemplated by the bidding procedures.
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In contrast to QVC, Viacom seeks no special treatment.
We are not seeking changes to the bidding procedures which
could give Viacom an advantage. We are not threatening to drop
our offer or to pursue litigation against Paramount, as has
QVC.
We will continue to play by the rules. And most
----
importantly, we will continue to exhort the Board to abide by
----
the bidding procedures so that stockholders can decide which
offer to accept. We believe the Board should be and will
continue to be guided by this overriding principle. Viacom and
its advisors are available to discuss our offer or any of the
foregoing issues with the Paramount Board or its advisors.
Very truly yours,
/s/ Stephen R. Volk
Stephen R. Volk
SMITH BARNEY SHEARSON ADDENDUM
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I. Viacom's Revised Offer Is Substantially Improved
. Viacom significantly increased the cash portion of its bid
-- Increased from $85/share to $105/share
-- A total increase of over $1.1 billion
. Viacom greatly increased the certainty of the value of its bid
-- Cash now represents 65% vs. 55% under its previous bid
-- Any short term stock price fluctuation will have less impact
. Viacom's blended offer improved by approximately $194 million or
$1.58/share
REVISED PREVIOUS
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Exchange Exchange
% Ratio Value % Ratio Value
--- -------- ------ --- -------- ------
Cash 50.1% $105 $52.61 51% $85 $43.35
VIA($47.875)* 49.9% .00000 0.00 49% .20408 4.79
VIAB($43.500)* 49.9% .93065 20.20 49% 1.08317 23.09
Conv.Pref. 49.9% .30408 7.59 49% .30408 7.59
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$80.40 $78.82
* Price as of 1/6/94 close
II. Viacom's Announced Merger with Blockbuster Adds Significant Value to a
Viacom/Paramount Merger
. Blockbuster is an extremely well run high growth company
-- largest retailer of home video products in the world
-- leading national brand
-- expected goal to become the largest U.S. music retailer in 1994
-- distributer of filmed entertainment through Spelling and Republic
pictures
-- significant growth expected in entertainment centers (Discovery
Zone)
. Wayne Huizenga, Steve Berrard and their management team will provide
significant additional management strength for the combined companies.
. Wall Street analysts are extremely positive on Blockbuster as shown by
the most recent research reports.
Date Firm Rating
---- ---- ------
11/30/93 Robertson Stephens Buy/Hold
11/22/93 William Blair Buy
11/02/93 NatWest Securities Buy
11/01/93 Paine Webber 2-Buy
10/27/93 Goldman Sachs Moderate Outperform
10/21/93 Kidder Peabody Outperform
10/21/93 Merrill Lynch Buy
. Blockbuster provides the combined Viacom/Paramount/Blockbuster a strong
balance sheet, strong cash flow, and earnings diversification.
-- Combined company is expected to have:
- market capitalization in excess of $26 billion
- 1994 cashflow (EBITDA) in excess of $2 billion
- total debt/capitalization below 42%
. The cashflow generated by a combined Viacom/Blockbuster/Paramount will
be balanced, with each company contributing approximately one-third
-- This will help offset Paramount's lower cash flow multiple and
protect against Paramount's more volatile earnings base.
. Blockbuster combined with Viacom/Paramount will provide significant
additional revenue enhancements and cost reduction opportunities
Revenue Enhancement Cost Reduction
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- Retail Distribution - Distribution
- Merchandising - Advertising
- Multimedia - Overhead
- Cross Promotion - Purchasing economies
MTV/music retail
Showtime/video rental
Nickelodeon/Discovery Zone
- Database marketing
- Fifth network
- International
- Edutainment
- Live entertainment
III. Viacom's Offer is Superior to QVC's Offer
. Viacom is offering significantly more cash per share than QVC
Per Share Total
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Viacom $105 $6.5 Billion
QVC $ 92 $5.7 Billion
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$ 13 $800 Million
-- Approximately $6.52 more per share on a blended basis
. Viacom believes its shares are significantly more valuable than QVC's
shares
-- Viacom is a much larger and diversified company than QVC
Viacom/Blockbuster QVC
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- Cable TV Networks - Home Shopping Cable Network
- MTV
- VH1
- Nickelodeon
- Nick at Nite
- Showtime
- The Movie Channel
- Flix
- TV and Radio Stations
- Significant Cable Operations
- Joint Ventures
- Lifetime
- Comedy Central
- All News Channel
- Video rental
- Music retailing
- Filmed entertainment
- Entertainment Centers
-- Viacom and Blockbuster have substantially more complementary
assets to Paramount's than QVC
-- The $3 billion of value created through a Viacom/Paramount
combination that Booz Allen presented to Paramount is
conservative
- This represents over $24/share of potential value
-- Viacom's talented management team has an extremely successful
track record of generating significant growth and innovation
IV. Viacom's Stock Price Should be Dramatically Higher than QVC's After a
Completed Merger with Paramount
VIA/ PCI/ BV QVC/ PCI
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- % Contribution to Combined
EBITDA 32% 34% 34% 25% 75%
- Pre transaction EBITDA
multiple (9/7/93*) 16.5x 10.4x 14.0x 15.5x 10.4x
- Weighted avg EBITDA
multiple 1994 13.6x** 11.7x
- Implied stock price*** $55 $26
* Immediately before Viacom's announced merger agreement with Paramount
** Due to the substantial synergies expected to be achieved, and prospects for
higher growth, the multiple could approach 15x for Viacom/Blockbuster/Paramount.
*** Based upon estimated 1994 EBITDA and pro forma capitalization
. Viacom should trade now at $55 based on its weighted EBITDA multiple
. Viacom's deal is now trading at a significantly lower 1994 EBITDA
multiple than QVC's deal
. Smith Barney believes QVC's current stock price does not reflect post
transaction realities
-- QVC's current price of $39 7/8 implies a multiple well in excess
of 11.7x, its weighted average multiple - approximately 14.2x
-- This implies that a management change results is over $2 billion
of value
-- QVC has stated it intends to sell Paramount's theme parks and TV
stations which we believe to represent over 25% of Paramount's
cash flow
- The EBITDA multiple that could be achieved in a sale would
be substantially below the multiple paid to acquire
Paramount
- This would further increase QVC's implied EBITDA multiple
required to hold its current price
. While Barry Diller may be an excellent manager, increasing Paramount's
inherent growth rate by merely a management change appears unlikely
-- In any event, Viacom and Blockbuster have achieved equal
accomplishments without reliance on any one individual
. Paramount's lower multiple reflects an expected lower
growth rate
-- This growth rate and multiple is in line with its closest
comparables
- Time Warner
- Disney
. While improving studio cash flow may be possible, the studio
represents less than 20% of Paramount's cash flow
. The remaining 80% of cash flow represent businesses where the growth
and profitability can not be easily altered through management change
- Publishing - Theatres
- Madison Square Garden - TV stations
- MSG Cable Network - Theme Parks
- USA and SciFi Networks - Knicks and Rangers