The Envelope, Please...

Barry Diller and Sumner M. Redstone made their final offers for Paramount Communications Inc. on Feb. 1 with characteristic drama. On the day bids were due, Diller tracked down one of his board members to a heliport in Venezuela, to win approval for QVC Network Inc.'s proposal to boost its cash offer to $104 a share. And both QVC and Viacom Inc. held their bids until moments before the 5 p.m. deadline. Nevertheless, the latest skirmish in the five-month-old Paramount battle aroused about as much excitement as a fifth Super Bowl with the Buffalo Bills.

By now, arbitrageurs and other shareholders realize that Diller and Redstone are only tinkering with the mix of cash and securities in their offers. Diller's new bid, for example, is no richer than his previous one, although it has $750 million more in cash. At current stock prices, says Lisbeth R. Barron of S.G. Warburg & Co., Viacom's bid is worth $10.2 billion, while QVC's is $10.5 billion.

NICE CUSHION. So who's going to win? At the moment, Wall Street gives the distinct edge to Viacom, despite its lower current value. That's because Redstone is offering shareholders a hedge against further erosion in his stock price.

Diller opted against such a cushion, but his advisers believe the former Paramount studio chief can win points by arguing that he would run the company better than Redstone. Paramount could use a steady hand: On Feb. 2, it warned of a third-quarter loss of $35 to $40 million. Diller's camp also plans to sow fears among Paramount shareholders about Viacom's prize asset, MTV. They say a new music-video channel, backed by big record companies such as Time Warner, Sony, and EMI, could hurt MTV by denying it access to performers. Nonsense, says Viacom: The record companies specifically said they would continue to license music to MTV.

Investors have until Feb. 14 to make their choice. That gives Diller two weeks to make his case. Given the cynicism and weariness of most Paramount shareholders, he faces a tough pitch--dramatic flourishes or not.

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