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Settlement Talks Between Viacom, MCA Off in USA Network Dispute

October 25, 1996

NEW YORK (AP) _ Viacom Inc. and MCA Inc. have ended settlement talks to resolve a pair of lawsuits in a dispute over the two entertainment companies’ joint ownership of cable TV’s USA Network.

Terse statements Friday issued by both sides dashed speculation that the two were near an agreement that would have allowed Viacom to gain MCA’s 50 percent of USA Network in return for a $1.45 billion payment and its 50 percent interest in the Sci-Fi Channel.

``Viacom Inc. today announced that it has terminated settlement discussions with MCA and that any proposal that Viacom may have had is no longer under consideration,″ the company said.

MCA parent Seagram Co. announced that discussions ``have terminated.″ Viacom and Seagram declined to comment beyond their statements.

The two lawsuits went to trial in Delaware on Oct. 15, but the proceedings were twice postponed this week to allow the parties to talk. Seagram said in its statement that the nonjury trial would resume Monday, when the current adjournment was scheduled to end.

Both the entertainment industry and Wall Street have been closely following the trial, both for its impact on the USA Network and for its star appeal. It pits Viacom chairman Sumner Redstone against Frank Biondi, his former No. 2 executive and now chairman of MCA.

The dispute came to a head in April. MCA sued first, alleging Viacom’s ownership of competing networks like MTV, VH-1 and the recently launched Nick at Nite TV Land violated their ownership agreement, dating back to 1981.

MCA said that holding the competing networks should trigger a contract provision forcing Viacom to either sell its half of the cable TV network to MCA at a price determined independently or buy MCA out. MCA, which is 80 percent owned by Seagram, was asking that Viacom either sell the other networks or honor the provision calling for a sale or purchase. Biondi has said in the past MCA would like to own USA Network outright.

Viacom countersued, also in Delaware Chancery Court, seeking unspecified damages. It argued MCA was ``attempting to garner whatever leverage it can find to force Viacom to sell cheap when Viacom had no desire to sell at all.″

Viacom alleges the contract provision requiring a sale or purchase, which dates back to before it acquired the USA Network stake, is not binding. It also argued MCA is guilty of unfair competition and breach of its fiduciary duty under their agreement.

MCA’s lawsuit was filed shortly after Biondi became chairman and chief executive of MCA, the parent of Universal Studios. He had been fired Jan. 17 as Redstone’s right-hand man.

Viacom gained its USA Network stake through its 1994 acquisition of Paramount Communications. MCA bought a one-third stake in USA in late 1981, which was increased to 50 percent six years later when a third partner, Time Inc., sold out to both Paramount and MCA.

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