Two major cable-TV operators, United Cable and United Artists Communications, said Friday that they have agreed in principle to merge into a new company, which would become the fourth-largest in the industry.
Through a swap of the two companies' shares, valued at roughly $2 billion on the stock market, the proposed merger would be one of the largest in the history of cable TV. It also comes at a time of growing consolidation and high prices in the cable-TV business.
The deal also would consolidate already-large holdings of Tele-Communications Inc. in the two firms. TCI, the nation's largest cable-TV operator, would end up with roughly 45% of the new company, according to a top officer at United Cable.
TCI, whose majority shareholder is industry leader John C. Malone, presently owns 65% of United Artists Communications and 23.4% of United Cable. All three firms are headquartered in Denver. United Artists Communications is not related to the United Artists motion picture unit of MGM/UA Communications Co.
The deal is conditioned upon approval by federal regulators, as well as by the boards and stockholders of the two firms.
Gary S. Howard, vice president and treasurer of United Cable, said TCI will not control the new firm because it will name only three of the 14 directors on the combined board. He said TCI has no representation presently on United Cable's board. No regulatory problems are expected, Howard said.
The new firm, which would operate under a United Artists' name, temporarily is to be called New-UA.
In addition to having about 2 million cable subscribers nationwide, the new firm would continue to own UA's 2,000-plus motion picture theaters. It also would continue to manage about $320 million in real estate assets of UA.
United Cable's stock fell $1.675 in Friday's continuing stock market plunge, closing at $24.50 on the New York Stock Exchange. Tele-Communications closed at $22.675, down 87.5 cents in the over-the-counter market. UA, also traded over the counter, dropped 50 cents to close at $24.25.
The announcement of the proposed merger said it is "contemplated" that United Artists will be granted an option to buy for cash "a substantial" voting position in United Cable or to buy cable assets of United Cable.