Valley Cable TV, the dominant cable operator in the San Fernando Valley, will be sold to a New York cable concern for $100 million under an agreement announced by the two companies Friday.
Six-year-old Valley Cable has 62,000 subscribers in an area west of the San Diego Freeway and north of Ventura Boulevard, and 2,000 more in the city of San Fernando. Its franchise covers an area of an estimated 176,000 potential customers, and it lists itself as among the 100 largest cable concerns in the nation.
Valley Cable's owner, Toronto-based Hollinger Inc., agreed to sell most of the firm's assets to a unit of privately held Cablevision Industries Corp. of Liberty, N.Y., which says it is the nation's 21st-largest cable operator.
Boni Fine, Valley Cable's general manager, said the company had operating cash flow of $4.1 million last year on revenue of $19 million. Valley Cable, like much of the industry, has been unprofitable, but the firm would not disclose its losses.
"That's a system with a lot of up-side potential," said Larry Gerbrandt, a senior analyst with the media consulting firm of Paul Kagan Associates.
He said U.S. cable firms, on average, reach 57% of their potential customers, but Valley Cable has a rate of only about 35%.
He noted that the industry average cash flow is 40% to 45% of revenue. Valley Cable, at about 22%, fell far short of that last year.
Fine said the sale will probably not be completed until the end of the summer because approval is needed from the city of Los Angeles and from the Federal Communications Commission.
She said the transaction will not include the city of San Fernando franchise, which will probably keep the name Valley Cable TV. No new name has been chosen for the rest of the operation, she said, and no changes are expected in staffing, management, programming or fees. Valley Cable now employs 125 people, she added.
Cablevision Industries is owned by Alan Gerry, who is also chairman, president and chief executive. The company said it owns and operates cable systems serving more than 400,000 subscribers.
Gerbrandt said the purchase price of $1,613 per subscriber seems reasonable, given the surge of cable-system prices since 1984. He said the average price was $1,419 per subscriber last year, against $946 in 1984. Yet the volume of deals has also surged, he said.
Valley Cable, based in Chatsworth, charges $13 a month for 40-channel basic service for a single cable-ready television set. Fine said the company is negotiating with Los Angeles city officials to renew its franchise, but that the terms, which will involve payments to the city, have not been worked out.
She said no customer rate increase is planned for this year. Rates were raised $1 in February, she said.
Gerbrandt said most cable companies lose money because of great depreciation and interest expenses and thus are more valuable to private owners like Gerry, who emphasize cash flow, than to public companies like Hollinger, which want to show earnings for their shareholders.