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Business Associations Keyed to Coffee, 9th Ed.
Paramount Communications Inc. v. QVC Network Inc.
Citation:
637 A.2d 34 (1994)Facts
Paramount Communications Inc., a publicly traded Delaware corporation, began exploring strategic expansion opportunities in the entertainment industry. After initial discussions between Paramount’s CEO Martin Davis and Viacom’s controlling stockholder Sumner Redstone, the companies negotiated a merger agreement. On September 12, 1993, the Paramount Board unanimously approved a merger with Viacom that included several defensive provisions: a No-Shop Provision limiting Paramount’s ability to consider other offers, a $100 million Termination Fee payable to Viacom under certain conditions, and a Stock Option Agreement giving Viacom the option to purchase 19.9% of Paramount’s stock with unusual features including a “Note Feature” and a “Put Feature.”
On September 20, 1993, QVC proposed a higher-value merger with Paramount at approximately $80 per share compared to Viacom’s offer valued at about $69 per share. The Paramount Board initially refused to engage with QVC, citing the No-Shop Provision. After QVC provided financing evidence, Paramount authorized limited discussions. On October 21, QVC announced a hostile tender offer for 51% of Paramount’s shares at $80 per share. In response, Viacom increased its offer, and the Paramount Board approved an amended merger agreement with Viacom on October 24, but did not remove or modify the defensive provisions.
QVC subsequently raised its offer to $90 per share on November 12, but the Paramount Board determined this was not in stockholders’ best interests, citing excessive conditionality. Throughout this process, the Paramount Board failed to properly evaluate the competing offers or negotiate with QVC, despite QVC’s offer being valued at over $1 billion more than Viacom’s offer at then-current values.
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