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Paramount Stock Climbs on Rumors of Viacom Merger : Entertainment: Sources say the two companies nearly reached an accord in July. More talks have followed.


Paramount Communications stock rose to a 52-week high Thursday, spurred by rumors that the Hollywood studio and publishing giant might merge with Viacom Inc.

The two companies nearly reached a merger accord in early July, sources said Thursday, but the deal apparently collapsed over price.

Further talks have occurred since then, one source said. But price could pose an even greater problem now, since Viacom's stock has jumped 29% since early July, while Paramount's has advanced less than 5% and its movies released since then have performed poorly at the box office. At current market prices (and including debt), the combined companies would be worth about $16.5 billion.

Outsiders speculate that Paramount directors may discuss these developments when they hold a routine board meeting Thursday. At least some members of the Paramount board were aware of the seriousness of the talks in July, one source said.

"There's nothing happening at the moment, but, like Sisyphus, there's always another try," said one knowledgeable executive, referring to the mythical figure condemned to push a huge block uphill again and again, only to have it roll back down each time.

Neither Paramount nor Viacom would comment. Paramount stock rose 50 cents Thursday to close at $57.25 on the New York Stock Exchange. Viacom was unchanged at $66.50 on the American Stock Exchange.

A merger of Viacom and Paramount would win kudos on Wall Street because of the complementary assets owned by the two New York-based companies. Both own television stations and significant TV libraries, but their most coveted assets are Paramount's movie studio and publishing operation and Viacom's powerhouse cable TV networks, led by MTV and Nickelodeon. Viacom also owns pay services Showtime and the Movie Channel, 50% of Comedy Central and a third of Lifetime. And it has about $2.5 billion worth of cable TV systems.

Until recently, Turner Broadcasting System Inc. was regarded as a possible merger candidate for Paramount, but Chairman Ted Turner last month bid for two independent film companies, which could take a while to absorb. The deals--with New Line and Castle Rock--still await shareholder approval, although the Turner board gave its blessing last month.

"With Turner taking himself out of the picture, it's the last really logical, great deal for these two companies," said Emanuel Gerard, a partner at the Wall Street firm Gerard Klauer Mattison & Co.

Such a merger would pose few regulatory problems, unlike a merger with a broadcast network company such as Capital Cities/ABC. For all of these reasons, the deal would probably be hailed as a "career capper" for both Viacom Chairman Sumner Redstone and Paramount Chairman Martin S. Davis, who have known each other for three decades and are believed to have worked out some sort of amicable solution regarding corporate titles and authority if a merger ever does take place.

Redstone, 70, would wind up with more than 30% of the combined company. At Viacom, he proved his willingness to turn over the chief executive's title to a younger man, Frank Biondi Jr.

Davis, 66, has been dogged by criticism for indecisiveness as other major studios have completed huge mergers in the last four years. Ever since Paramount lost its hostile bid for Time Inc. in 1989, the company has made cautious investments in lesser-known theme parks and television stations, despite its cash-rich position from the divestiture of the Associates finance company in 1989. As recently as May, however, Davis vowed in an interview that Paramount "is a buyer or a 'mergerer.' "

For Redstone, a merger with Paramount would crown his other accomplishments, which began as a military code cracker in World War II and continued with his shrewd management of a stock portfolio and his family's New England movie theater business.

In 1986, Redstone startled Wall Street with a bid for Viacom, which ultimately cost $3.2 billion. Redstone still owns more than 80% of the company.

Both he and a Paramount spokesman declined to comment on rumors of any business combination. Davis, on vacation, was unavailable for comment.

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