Viacom sued over offer for SportsLine.com

Friday, July 2, 2004 | 8:54 a.m.

BLOOMBERG NEWS

NEW YORK -- Viacom Inc. was sued after it offered $42 million in cash Thursday for all of SportsLine.com, the sports Web site operator whose clients include Viacom's CBS television network and the National Football League.

Viacom, the third-largest U.S. media company, offered $1.50 a share, a 39 percent premium over Wednesday's closing price. Viacom already owns about 38 percent of SportsLine.com, which had 45.3 million shares outstanding as of June 30.

A shareholder, Robert Terchek, filed a lawsuit Thursday in Delaware challenging the offer.

Brian Salerno, who helps manage about 600,000 SportsLine.com shares for Munder Capital Management, said while the bid undervalues SportsLine.com, Viacom might justify it based on the stock's decline.

"I agree the company is worth more than $1.50 a share; however, the market certainly hasn't agreed with that, and it's because of the control that CBS wields over SportsLine because of the deal they signed a few years back," Salerno said.

SportsLine.com agreed in March 1997 to pay CBS $20 million in stock a year for advertising and promotion.

"They signed when the market was in a different spot and kind of tied their own hands," Salerno said.

Viacom agreed to defer a SportsLine.com payment of $35 million in stock and cash, including $15 million deferred from 2003, to Aug. 1. The payment was due Thursday, said Larry Wahl, SportsLine.com's director of investor relations. SportsLine.com will owe Viacom $40 million more in stock by January 2007.

Terchek said in his lawsuit in Delaware Chancery Court in Wilmington that Viacom's offer is too low based on SportsLine.com's narrowing losses.

SportsLine.com, based in Fort Lauderdale, Fla., in April reported a loss of 20 cents a share in first quarter, narrower than a per-share loss of 26 cents a year earlier.

"Viacom timed the announcement of the proposed buyout to place an artificial lid on the market price of SportsLine's stock so that the market would not reflect SportsLine's improving potential, thereby purporting to justify an unreasonably low price," Terchek said in the lawsuit, which seeks to stop the buyout and asks for damages.

Susan Duffy, a Viacom spokeswoman, said the offer to SportsLine.com "was made in good faith and represents a substantial premium to the market price. It will be evaluated by a special committee of SportsLine independent directors who will have access to the all the information necessary to evaluate it properly."

In June SportsLine.com, which has reported combined net losses of more than $350 million since 1995, hired Perseus Group, based in San Francisco, as a financial adviser to explore options.

SportsLine.com shares rose 56 cents to $1.64 as of 3:59 p.m. New York time Thursday in Nasdaq Stock Market composite trading. SportsLine.com shares had lost 14 percent this year.

Viacom shares fell 25 cents to $36.10 at 4 p.m. in New York Stock Exchange composite trading. The shares had fallen 18 percent this year. Viacom is based in New York.