Sumner At The Summit

'Congratulations on your glorious victory," read the card on a bottle of Veuve Clicquot champagne sitting outside Sumner M. Redstone's office. "From your fair-weather friends at MTV." Next to it was a phone log with messages from Hollywood lobbyist Jack Valenti, Gerald M. Levin of Time Warner, and Tom Pollock of Universal Pictures.

Redstone had a world of friends on Feb. 15, and no wonder: At the stroke of midnight, the chairman of Viacom Inc. finally triumphed in his epic takeover battle for Paramount Communications Inc. By engineering a three-way merger of Viacom, Paramount, and Blockbuster Entertainment, Redstone has created the nation's second-largest media empire--after Time Warner Inc.--with annual revenues of about $10 billion. In the Burke's Peerage of media aristocrats, Redstone has clearly ascended from squire to baron.

Now, kicking back at the end of a day of TV interviews and congratulatory phone calls, Redstone was in a magnanimous mood. With him was an equally ebullient Frank J. Biondi Jr., Viacom's CEO, who will also run the new company. As they mused about the fight--echoing each other on some points, disagreeing on others--Redstone and Biondi offered a glimpse of how they aim to meld three companies into one.

Of his rival bidder, QVC Network Inc. Chairman Barry Diller, Redstone says: "There's no lingering ill-feeling. I consider myself a lover, not a hater." The two aren't exactly swapping valentines yet: QVC's hostile bid drove up Paramount's price from $8.2 billion to roughly $10 billion (table). All the same, Redstone says he is open to doing business with Diller's home-shopping channel in the future. Indeed, Diller had been discussing a deal with MTV to peddle music paraphernalia before the bidding war erupted.

Redstone is even extending an olive branch to one of Diller's erstwhile backers, cable titan John C. Malone. Redstone plans to seek him out while at a Viacom meeting in Colorado the week of Feb. 21 to express hopes that he can cooperate with Malone's Tele-Communications Inc. "We don't want a war," says Redstone. Still, the detente has its limits: Viacom isn't ready to withdraw an antitrust suit against Malone, particularly since TCI is now merging with an even larger Bell Atlantic Corp.

SHAREHOLDER IRE. For now, Redstone has his own merger to worry about. Viacom's Class B shares have slipped from 55 to a recent 28 during the course of the takeover. That erodes the value of his own holdings from $5 billion to $3 billion. More important, it has angered some Blockbuster shareholders, who are being paid for their company in Viacom shares. Investors will vote on the merger in April, and Blockbuster Chairman H. Wayne Huizenga warns that unless Viacom's stock revives, Redstone may have to sweeten his offer.

Redstone believes that Wall Street will come to appreciate the value in linking Blockbuster's retail stores with Viacom's cable networks and Paramount's extensive film library. "The opportunities we have with Paramount and Blockbuster," he argues, "are ones we would never have by ourselves." And anyway, he notes, the Paramount/Viacom merger will go through regardless of whether Blockbuster and Viacom join forces.

Restoring Paramount to health is another matter. The company's film studio has struggled in recent months: Its two Christmas films, Wayne's World 2 and Addams Family Values, were disappointments, while an upcoming feature, Blue Chips, went over budget by at least $10 million. Observers say Redstone and Biondi will clean house at Paramount Pictures Corp., starting with Chairman Sherry Lansing. But Biondi says Lansing has been hamstrung by a corporate strategy that has emphasized big-budget pictures, and she may well stay on.

Redstone doesn't preclude selling off assets to pay down his roughly $9 billion in debt. He confirms that he may revive an earlier plan to sell a stake in Viacom's cable systems to a regional telephone company. And the future of Paramount's 50%-owned USA Network is in question. But unlike Diller, Redstone wants to keep Paramount's seven television stations, which form the core of Paramount's new broadcast network. And he doesn't plan to ride herd on Paramount's Simon & Schuster publishing arm or its chairman, Richard E. Snyder. "He's one of the good executives over there," says Redstone.

But don't assume from his generous tone that Redstone enjoyed the takeover. The 70-year-old executive was dogged by accusations of manipulating Viacom's stock. And he got a stinging rebuke from the Delaware Chancery Court, which threw out his original merger with Paramount. "The pain was extreme, and a lot of it was unwarranted," he says. "But when we went over the top, all the pain, frustration, and exhaustion went away."

Now, Redstone and Biondi can turn to happier tasks, such as choosing a name for their baby behemoth. Playing on his boss's legendary tenacity and the Blockbuster name, Biondi jokingly suggests "Ballbuster."

"That's a good description of Wayne Huizenga," allows Redstone, with a twinkle in his eye.

"Oh, and you're just a day at the beach," quips Biondi.

"In Wayne's hands," responds Redstone, "I'm nothing but putty."

Somewhere, Barry Diller is rolling his eyes and gnashing his teeth.

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