Time Inc. Rejects Sweetened Offer From Paramount

Time Inc.’s board of directors moved swiftly Monday to reject as “inadequate” the sweetened $12.2-billion bid for Time that Paramount Communications made only last Friday. The reaction was widely expected.

Time also attacked the new Paramount bid in federal court, only to be slapped in turn with a surprise Delaware lawsuit filed by a powerful group of investors who--until Monday--had refused to confirm their stakes in Time.

Among other things, the latest Delaware suit seeks to force Time to negotiate with Paramount. It was filed by the Robert M. Bass group, Hollywood entrepreneur A. Jerrold Perenchio and Cablevision Media Partners, which is believed to be controlled by New York cable TV executive Charles F. Dolan. According to the suit, the Bass group owns over 600,000 shares of Time stock, while Perenchio and Dolan together control about 1.2 million shares. The three groups together hold less than 5% of Time shares.

In the suit, the Bass group is asking a Delaware judge to delay Time’s shareholder meeting Friday because the company has not recirculated proxy materials since Paramount made its surprise bid three weeks ago.

The lawsuit also contends that shareholders should be granted more time to nominate an opposing slate of directors to the four incumbents--including three Time executives--who are standing for election.

In a telephone interview, however, Time Vice Chairman Gerald M. Levin said at least three letters have gone out to Time shareholders to keep them informed of recent events. He insisted that most of the matters before the shareholders remain unchanged.

One major difference, however, is that Time will no longer ask its shareholders to vote on a stock-swap merger with Warner Communications Inc., because Time’s board decided to acquire Warner for $14 billion after Paramount mounted its hostile offer. Time’s directors--empowered to acquire companies without the approval of shareholders--decided not to risk a shareholder vote on the Warner purchase, which has enraged some investors because the company will take on billions of dollars in debt without paying any cash to Time shareholders.

After Monday’s four-hour board meeting, Time’s directors said their investment bankers had reaffirmed their earlier assessment of the Warner acquisition and advised directors against accepting the $200-a-share Paramount bid, increased from the earlier $175-a-share offer. They also contended that Paramount has not yet met its own conditions for the offer by arranging takeover financing, completing the transfer of Time’s cable licenses and rescinding the anti-takeover stock swap with Warner Communications.

New Challenges

Paramount said the rejection would not end its 3-week-old takeover effort. “We will continue to pursue our acquisition of Time in a calm, studied, and deliberate manner,” Paramount said in a statement.

Meanwhile, in a federal court in Manhattan, Time filed new legal challenges to the sweetened Paramount bid, attacking it as misleading because Paramount allegedly fails to tell shareholders that it cannot purchase Time shares by the July 7 expiration date advertised. A hearing on the issue is scheduled late tomorrow afternoon before U.S. District Court Judge Robert W. Sweet.

No Comment

On Wall Street, Time shares fell $1.875 to $164 on volume of 1.8 million shares, as the Time board’s reaction was widely anticipated. Paramount’s stock, fueled by new rumors that the hostile bidder may itself be a takeover target, advanced $2.375 to $60.375 on heavy volume of 2.4 million shares, making it the most actively traded issue. Warner edged up 25 cents to $58.875 on volume of 1.9 million shares.

Time’s Levin refused to comment on a published report that the company’s investment bankers have valued Time at $250 a share. “The banks have given a value of the company, and what we’ve said is that $200 is not within that zone,” Levin said, declining to elaborate.

Time said in a letter to Paramount Chairman Martin S. Davis that Time last year had considered acquiring Paramount but had rejected the move “as a less desirable means of achieving” the goals it hopes to meet with the Warner acquisition.

Time’s letter said the media giant had taken a new, detailed look at its decision to buy Warner “that completely reconfirms our judgment that acquiring Warner is the optimum means to implement our long-term strategy.”

Time’s rejection “was anything but a surprise,” said Peter P. Appert, analyst with the C. J. Lawrence Morgan Grenfell investment firm in New York. “No matter what they’re doing today, it’s all going to come down to the what the courts in Delaware say.”