Paramount 1994

Study questions

1. What do you think of Redstone’s tactics in making the initial offer to Paramount? The price? The deal structure? The lock-up option? The termination fee? What did the market think of the initial offer?

2. How did Viacom bid price, and total shares offered change overtime? What caused those changes?

3. What do you think of the behavior of Paramount’s board in the process? Please consider its behavior both before and after the Delaware Court decisions. What do you think of the auction procedure devised by Paramount’s board after the Delaware Court decisions?

4. Explain what has happened with the stock prices of the three players from September to the end of January. Specifically, explain the movements of QVC and Viacom stock as the likelihood of their winning changes. November 24 and January 7 are particularly interesting.

5. Which of the two final bids is more attractive at the current stock prices of QVC and Viacom? Which of the two bids would you accept? Why?