(FORTUNE Magazine) – Martin S. Davis, chairman and CEO of Paramount Communications -- ne Gulf & Western -- knows a good business strategy when he steals one. For the past three months he listened to J. Richard Munro, his counterpart at Time Inc. (parent of the publisher of Fortune), preach the gospel of globalism: the need for U.S. media companies to bulk up enough to compete with ever larger offshore competitors. Munro's solution was to merge with Warner Communications in a tax-free, debt-free deal that promised big values for the future. Davis's was to try to break up that deal and take over Time in a $10.7 billion, $175- $ a-share offer -- all in immediate, albeit taxable, cash. The Davis bid came two weeks before Time shareholders were to vote on the Warner merger. Analysts figured the stock of Time Warner would trade at about $110 a share. Munro was not flattered by the imitation. He is furious at Davis, telling him in a letter, ''You've changed the name of your company but not its character: It's still 'engulf and devour.' '' Munro also accused Davis of reneging on a promise never to launch a hostile bid for Time. ''I'm disappointed that I can't rely on you as a man of your word,'' he wrote. ''Live and learn.'' Davis denies he made any such promise. ''Not true,'' he told Fortune. ''There was no commitment.'' He says that he agreed to respect Time's desire to remain independent, but that when Time executives entered into the Warner deal, they gave up their autonomy ''and changed the playing field.'' Paramount sued Time in Delaware's chancery court to void its poison pill and quash a lockup agreement that gives Warner the right to exchange 9.4% of its shares for 11.1% of Time shares. With the bid for Time stock at $175 a share, and Warner's recent price of $56, any successful bidder for Time would incur a cost of $270 million in the event of a swap. With Warner, the combination would create a vertically and horizontally integrated entertainment and media company. In addition to its magazines (Time, Life, FORTUNE, Sports Illustrated, People, and Money among them), Time owns HBO, Cinemax, and the second-largest cable television system. Warner studios could be an in-house font of programming. The fit is so good that Davis may have concluded that the deal put Paramount at a competitive disadvantage. Davis contends Paramount and Time would also be a powerhouse combination. Paramount Pictures has been one of Hollywood's hottest studios, and Paramount Television makes both network series and feature-length productions. Paramount also has significant publishing assets, including Prentice-Hall and Simon & Schuster. To buy Time and refinance current debt, Davis will have to borrow $14 billion. He insists no Time assets would be sold, but covering the some $1.2 billion in annual interest charges could prove difficult without big cost cutting. Time's board of directors may not feel compelled to sell to the highest bidder, or even to sell at all. Time may well try to win some favor on Capitol Hill by portraying Paramount as a debt-laden job-buster. Both sides are aware -- as is Warner CEO Steve Ross -- that federal friends could be crucial in a hostile takeover battle. As the country's largest magazine publisher, Time considers its editorial independence a national trust not to be trifled with for mere coin. The editor-in-chief, Jason McManus, sits on its board and reports to the directors, not to the chief executive. Neither Paramount nor any other major U.S. media company has such an arrangement. Davis told Fortune he is willing to guarantee in writing that he will not meddle with the magazines' editorial independence. Time is reportedly exploring a variety of defenses, including a leveraged recapitalization that would pay shareholders a large dividend, a cash offer for Warner to thwart the bid, and an offer for Paramount, possibly with Warner as a co-raider -- the so-called Pac-Man defense. Time might prove even more valuable to another acquisitor -- a big media company, say, or a buyout firm like Kohlberg Kravis Roberts. Time's best defense might be someone else's offense. Davis has acknowledged that by trying to buy Time, he may attract bidders for Paramount. He says that is all right with him too: ''We do not have an entrenchment policy. If the proper offer was to be received by this company, which brings out the full value, we would very definitely consider it.'' Time executives doubtless hope he gets an offer he can't refuse.