THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, August 9, 1994 TAG: 9408090425
SECTION: FRONT PAGE: A01 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 97 lines
TeleCable Corp., one of the largest companies headquartered in Hampton Roads, said Monday that it accepted a $1.5 billion buyout offer from Tele-Communications Inc., the nation's biggest cable operator.
The Norfolk-based company decided it is better to sell out than fight it out in the increasingly competitive business of delivering TV information and entertainment.
``We foresee that the distribution of video signals and telephone services will overlap and compete very soon,'' said Frank Batten, chairman of TeleCable.
``This presents many risks but even larger opportunities,'' Batten added in a prepared statement. ``We concluded that TeleCable could continue to thrive only as part of a company operating in larger markets and with access to resources and expertise in telephony.''
The sale, which involves the issuing of TCI stock to the shareholders of privately owned TeleCable, is expected to be completed by year's end. It would close one ofthe most lucrative chapters in the business career of media magnate Batten. Thirty years ago, Batten and Norfolk-based Landmark Communications Inc. decided to spend $500,000 to build a tiny cable system in Roanoke Rapids, N.C.
TeleCable grew steadily to eventually become one of the largest of the subsidiaries of Landmark, parent of The Virginian-Pilot and The Ledger-Star. Batten is also chairman of Landmark.
Broken off as a separate company in 1984, but still controlled by Batten and his family, TeleCable is the nation's 20th-largest cable operator. It has systems in 15 states.
But in a rapidly consolidating cable industry that is being challenged by the entry of large phone companies, the Norfolk-based company's 740,000 subscribers weren't enough to guarantee its long-term success, Batten said Monday.
TeleCable first began entertaining bids in 1989. After attracting several offers, it took itself off the block without saying why.
Round two of the sale effort began in February when TeleCable announced that it had hired the New York investment-banking firm of Lehman Brothers to help it explore ``future alternatives.''
Analysts had predicted the company would fetch about $1.5 billion.
TCI disclosed Monday that it will issue to TeleCable shareholders about 41.7 million shares of its own Class A common stock, plus $300 million in preferred shares that can be converted to common stock.
That, plus TCI's agreement to assume TeleCable's debt of roughly $250 million, would put a $1.5 billion value on the offer. TCI's Class A shares closed Monday at $22.75 a share, down 31 cents a share, in trading on the NASDAQ system.
Barry Kaplan, a cable analyst with the New York investment banking firm of Goldman, Sachs & Co., predicted the value to TeleCable's shareholders will grow even larger if TCI's stock rebounds. If TCI just returned to its 52-week high of $33.25 a share, that would add another $425 million to the value of the 41.7 million TCI common shares to be issued to Batten and other TeleCable shareholders.
Kaplan said TCI's stock price will rebound once cable operators shake off investor jitters caused by recent rate cuts imposed by the Federal Communications Commission.
He agreed, however, that operators like TeleCable would have a hard time prospering on their own.
``All the new business opportunities have a lot of economies of scale . . . which demand increased size,'' Kaplan said.
The TeleCable-TCI deal is one of a flurry of mergers rocking the industry. The biggest in the works is Cox Cable Communications Inc.'s planned $2.3 billion acquisition of Times Mirror Co.'s cable operations. TCI itself briefly succumbed to the merger mania last year, agreeing to a $33 billion buyout by Bell Atlantic Corp. That deal died earlier this year. Since then Englewood, Colo.-based TCI has been on the prowl. Last week, it completed the reacquisition of its former programming arm, Liberty Media Corp. Through Liberty, TCI is teaming up with Comcast Corp. to take over QVC Network Inc., the big home-shopping TV network.
TCI is the largest originator of programming for cable channels. It controls several large networks, including Home Shopping Network, and owns a stake in about a dozen other networks. It owns 18 percent of International Family Entertainment Inc., Virginia Beach-based parent of The Family Channel.
TCI said it is too early to say what will become of the 80 employees at TeleCable's Dominion Tower headquarters. MEMO: Staff writer Tom Shean contributed to this story.
ILLUSTRATION: Color photo
Frank Batten, chairman of Norfolk-based TeleCable
Graphic
TCI
TeleCable
For copy of graphic, see microfilm
KEYWORDS: TELECABLE CORP.
by CNB