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and they horsed around and they waited and let our offer proceed. . . . They fell behind
because they made conscious decisions to fall behind. And the best we know from Mr.
Costello [QVC’s chief financial officer] as we sit here today is that he is talking with his
banks, and maybe someday he will get the financing, or at least he is highly confident he
will. And maybe or maybe not his banks are as well. But the point is they were masters
of their own timing."

Three days after the hearing, Diller sent to the Paramount board commitment
letters from the six banks that had agreed to finance QVC’s bid as well as a binding
financing commitment from BellSouth. He also notified the Paramount board that QVC’s
bid had received antitrust clearance. The Paramount board did not budge.

Place Your Bets

On Thanksgiving Eve, November 24, the Chancery Court handed down its decision.
QVC won.

It was not an easy decision to write. Not that the court had any doubt how it
should come out. The original deal with Viacom was presented to the Paramount board
on September 9. Since that day, the court found, "the mindset of the board has been
patently unreceptive to gathering information by way of exploring or even discussing any
alternative transaction.” It was this mindset, the court continued, that explained the
board’s refusal to consider QVC’s sweetened offer even though it was worth $1.3 billion
more than the transaction with Viacom. In contrast, the court said, "the ‘conditionality’
of QVC’s offer was more a pretext than a problem, which management (and the board)
[chose] to hide behind in order to avoid obtaining information that might induce them to
take a second 1ook.”

The court was clear also about what motivated the board to favor Viacom. In the
case of the independent directors, the reasons were "not venal but laudatory," as these
directors had "no demonstrated self interest in the Viacom transaction, or in perpetuating
Mr. Davis or themselves in office.” Rather, they were driven by "a fervently and honestly-
held view that the Viacom deal is the only valuable transaction that will serve the best
interests of Paramount and its shareholders.” Management’s motivations were different.
Davis clearly cared a lot about continuing to run the company.

The court’s more difficult task was squaring the legal result it deemed appropriate
for these facts — holding that the board had breached its fiduciary duties — with existing
doctrine. The problem was that Time rejected the notion that a control change triggers
Revlon and instead held that Revlon was triggered if the company initiated — rather than
was drawn into — an active bidding or a breakup. Presumably, since the Paramount
board had not initiated the bidding or contemplated a breakup, its refusal to deal with

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