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Business Associations Keyed to Hwang, 3rd Ed.
Paramount Communications Inc. v. QVC Network Inc.
Citation:
637 A.2d 34 (1994)Facts
Paramount Communications Inc., a Delaware corporation operating entertainment businesses with approximately 118 million publicly-held shares, began merger negotiations with Viacom Inc. in 1993. Viacom was controlled by Sumner Redstone who owned approximately 85.2 percent of its voting stock. On September 12, 1993, Paramount’s Board unanimously approved a merger agreement with Viacom that would result in Paramount shareholders receiving cash and stock with a modest control premium, while Redstone would become the controlling shareholder of the combined entity. The agreement included three significant defensive measures: a No-Shop Provision preventing Paramount from soliciting competing bids, a $100 million Termination Fee payable to Viacom under certain circumstances, and a Stock Option Agreement granting Viacom the right to purchase 19.9 percent of Paramount’s stock at $69.14 per share with unusual features including the ability to pay with a subordinated note and a “put” feature allowing Viacom to require cash payment of the difference between purchase and market price. QVC, a competing Delaware corporation, submitted an unsolicited proposal on September 20, 1993, offering approximately $80 per share and subsequently increased its offer to $90 per share by November 12, 1993, exceeding Viacom’s revised offer by over $1 billion. Despite QVC’s superior offers and willingness to negotiate, the Paramount Board refused to negotiate meaningfully with QVC, failed to modify or eliminate the defensive measures, and continued to favor the Viacom transaction based on their vision of a strategic alliance, even after the economic disparity became substantial.
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