Viacom-QVC Battle Awaits Court Ruling : Merger: QVC hopes the judge will invalidate a “lockup” deal that adds $600 million to its cost of acquiring Paramount.

Despite the fact that it has been topped again in the bidding for Paramount Communications Inc., Viacom Inc. appears likely to stick with its $85-a-share offer until a crucial court hearing Tuesday in Delaware.

QVC Network Inc.--which raised its bid for Paramount on Friday to $90 per share--has made its tender offer conditional on the removal of “lockup” agreements between Paramount and Viacom that could add another $600 million to its costs of acquiring the company.

The lockup provisions were challenged in the lawsuit filed last month by QVC in Delaware Chancery Court, which decides certain corporate cases. In essence, QVC hopes to persuade the court that Paramount has put itself up for sale and should be forced to conduct a fair auction.

Paramount and Viacom, however, contend that they are adhering to a long-term business plan to merge their companies--a concept upheld by the Delaware Supreme Court in 1989 when Paramount tried unsuccessfully to break up the merger of Time Inc. and Warner Communications Inc.

The lockup provisions would require Paramount to pay Viacom a $100 million breakup fee and grant Viacom the option to purchase up to 23.6 million Paramount shares--nearly 20% of its outstanding stock--at $69.14 per share.

One of the pivotal issues will be Paramount’s so-called poison pill, which could sabotage QVC’s offer by flooding the market with new Paramount securities.

The hearing is scheduled to be heard by Vice Chancellor Jack Jacobs, who in 1988 overturned a poison pill provision adopted by Macmillan Inc., the publishing company, because he determined it no longer served any purpose. Two high bids were on the table, and the jurist ruled that keeping the poison pill in place would deprive shareholders of the opportunity to consider the alternatives.

Paramount has contended that--unlike Macmillan--it never embarked on an auction and should not be required to conduct one.

Jacobs is expected to rule before the expiration of Viacom’s tender offer Nov. 22. Some Wall Street traders are predicting that QVC will raise its bid again this week to drive Paramount’s stock sufficiently above $85 to discourage shareholders from tendering their shares to Viacom next Monday.

Based on Friday’s closing stock prices, the blended value of QVC’s overall bid exceeded Viacom’s by $7.37 a share. Paramount’s shares closed Friday at $83 a share.