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The initial response by Viacom executives was at first underwhelming. Greenhill had floated the idea before, only to have the tightfisted Redstone reject it as too risky. Now Viacom executives shook their head, stared at the ceiling or began pacing. When Viacom president and chief executive Frank Biondi, the senior officer present, began to question Levitt's collar approach, Greenhill snapped, "Look, do you want to win this thing?" Biondi did, of course; after hearing Greenhill out, he agreed that the collar was Viacom's best, if not it's only, option. "But how," asked the Viacom CEO, "do we sell it to Sumner?"
That turned out to be no problem. Redstone, who once saved his own life by clinging to a window ledge with his right hand during a Boston hotel fire, had vowed to do whatever it took to win Paramount. And with the Feb. 1 deadline for final bids fast approaching, he decided to seize the advantage. Four days after the Sunday meeting, Viacom raised the cash portion of its bid from $104 a share to $107 a share for 50.1% of Paramount stock and added the collar. Recalled Redstone last week: "We wondered, 'What would Barry do?' I said, 'Barry will not raise his offer.' Barry had said he would not raise his bid again, and I believed him." In fact, Diller had already decided privately that he would go no higher.
But very few others believed the tenacious and daring Diller would fold. As he neared his 52nd birthday, Diller famously yearned to own -- rather than merely run -- a Hollywood studio. And victory in the takeover brawl would settle an old score with Martin Davis, the tyrannical chairman of Paramount who had forced Diller from his post as head of the Paramount studio in 1984. If Diller won the battle, he would be the boss, and Davis would soon be history.
In the end, Diller could not -- or would not -- try to better Redstone's relentless drive to win at all costs. Weeks before Viacom applied the collar, Diller had packed up 10 lbs. of Paramount documents and hauled them along on a year-end Caribbean vacation. Running the numbers while onboard the rented yacht Midnight Saga as he cruised off St. Barts, Diller decided that Paramount was not worth a penny more than the $10 billion in cash and stock that QVC was bidding. "When I came back on Jan. 3," he recalls, "I said, 'We're not going to exceed our offer. The company is -- with a real stretch and some real hard work -- worth what we've offered, but I'm not going to offer any more.' It would have been irresponsible, I thought, and I held to that belief." Indeed, even when Diller threw more cash into his final offer on Feb. 1, he reduced the stock portion of the bid and thereby kept its overall value from rising.
Some members of the Diller camp chafed at his stand-pat posture. Bell South, which had invested $1.5 billion in QVC in support of the Paramount bid, urged Diller to devise his own collar. So did Bruce Wasserstein, Bell South's investment adviser. Diller refused to name names or discuss the matter. "Yes, of course, people had different opinions," he acknowledges. "Some were trying to persuade me until the end." But, he still insists, "a collar just doesn't make sense," because a break in the stock market, as he saw it, would force QVC to create more shares and dilute the interest of company shareholders.