Times Mirror may sell cable properties to Cox

June 04, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

In a move that could signal an end to the difficulties gripping the cable television industry, Times Mirror Co. said yesterday that it has reached a tentative agreement to sell its cable properties to Cox Enterprises Inc. for $2.3 billion.

The merger would vault Atlanta-based Cox Cable Communications to No. 3 among the nation's cable television companies in terms of subscribers, behind Tele-Communications Inc. and Times-Warner Cable.

For Los Angeles-based Times Mirror, publisher of The Sun and The Evening Sun, the deal could bring an infusion of cash to invest in its core publishing business and recent acquisitions in the growing multimedia industry.

It was not clear, however, how much of the transaction would be in cash. USA Today reported yesterday that the deal could take a form of a merger after which Cox would manage a new, combined company. Times Mirror confirmed the tentative $2.3 billion deal in a terse statement issued after the USA Today report, adding a later clarification that the money -- in whatever form -- would be flowing its way.

Analysts said a public announcement of terms of the tentative agreement is expected next week. Cox released a statement late yesterday confirming that it is holding "serious discussions" with Times Mirror but declining to comment further until the talks are completed. Attempts to reach Times Mirror were not successful.

The Securities and Exchange Commission restricts the information companies may provide during negotiations that can effect the value of stock.

However, the company earlier had indicated it might get out of the cable business.

"We have conducted extensive strategic reviews of our position in the cable television industry. We have retained investment bankers to assist us in pursuing alternatives," Robert F. Erburu, president and chief executive officer of Times Mirror wrote to shareholders in the company's annual report in February.

Cox had been the nation's sixth-largest cable television network with 1.78 million subscribers. Times Mirror had been 11th, with 1.23 million.

L The market reacted favorably to the news. Times-Mirror stock

jumped $3.75 to close at $35.75 after a trading halt of almost 6 1/2 hours. Cox is a privately held company, but other publicly listed cable television stocks were up across the board.

Paul Sweeney, a media industry analyst for Wheat First Butcher & Singer in Richmond, Va., said the message of the agreement was that "the deal market for cable stations is not dead."

The news of the probable Times Mirror-Cox deal comes almost two months after the collapse of an agreement by Southwestern Bell Corp. to invest $4.9 billion in Cox -- a failure that both parties blamed on rate rollbacks ordered by the Federal Communications Commission.

Coming on the heels of the breakdown of the merger of Bell Atlantic Corp. and TCI, the parting of Southwestern Bell and Cox threw the cable industry into a deep funk.

Some industry executives were left wondering whether it would be a long time before anyone bought a cable property at more than fire sale prices.

Yesterday's news provided some reassurance. Mr. Sweeney said the valuation of the Times Mirror properties, roughly $2,000 per subscriber, reflected the impact of the FCC's rate cuts but was "pretty reasonable."

James P. Reddan, a media analyst for Moran & Co. in Greenwich, Conn., took a more cautious view in the absence of details.

"On the surface, that price is a very good price and the value of cable systems hasn't been hurt by regulation," he said. If Times Mirror simply gets stock in a new company, that would send a more ambiguous signal, he said.

For Times Mirror, the sale of its cable TV systems signals a strategic decision to position itself as a provider of information rather than an owner of the conduit. The company's exit from the cable TV business, which it entered in 1970, follows its decision last year to sell off its remaining broadcast TV stations.

Times Mirror's cable systems are in 13 states, with the largest clusters in Arizona and California.

Besides owning The Sun, Times Mirror publishes the Los Angeles Times, Newsday, the Hartford Courant and other publishing businesses.

The company has also shown an interest in emerging new media. In April, it announced it would invest in Digital Pictures Inc., a developer of interactive entertainment software.

While an outright sale of the cable division might give Times Mirror a hefty sum of cash, it would be giving up what has been a potent generator of revenue. For its last full year, cable provided $339 million, or 12 percent, of its $3.7 billion in sales.

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