NEW YORK -- Tele-Communications Inc. is negotiating to purchase Viacom Inc.'s cable television systems for about $2.2 billion, according to investment bankers on both sides of the transaction.
The purchase would be one of the largest cable television system transactions in years, and the first big sale in the industry since the Federal Communications Commission in February ordered cable operators to lower their rates.
A TCI-Viacom transaction would also patch up the bitter rivalry between two industry heavyweights: Viacom Chairman Sumner M. Redstone and TCI Chief Executive John C. Malone. Under the plans being discussed, Mr. Redstone would scrap his federal antitrust suit against Mr. Malone, the bankers said.
Viacom, based in Dedham, Mass., would use proceeds from the sale to reduce the debt incurred in its $10 billion acquisition of Paramount Communications Inc.
This could be important for Viacom as its pending merger with Blockbuster Entertainment Corp., which was supposed to give the company hundreds of millions in annual cash flow, has been reported to be unraveling. "This deal, at least as now structured, is dead," PaineWebber analyst Craig Bibb said yesterday.
Viacom agreed to buy Blockbuster by offering its stockholders a package of Viacom shares. At the time, Viacom was trading at about $46, making the deal worth $8.4 billion. Yesterday, Viacom's Class A shares closed at $32.625, down 37.5 cents on the New York Stock Exchange.
Also yesterday, Viacom said it agreed to sell its one-third stake in Lifetime Television to its partners in the cable TV network for $317.6 million in cash.
If the deal with Viacom is completed, TCI, based in Englewood, Colo., would be able broaden its reach significantly by folding Viacom's 1.1 million cable subscribers into its 10.2-million subscriber base.
TCI also could use Viacom's systems -- in San Francisco, Nashville, Tenn., Dayton, Ohio, Salem, Ore., and suburban Seattle -- to develop telephone networks in these areas.