Proposed Merger With Tele-Communications May Be Topic : Storer Board to Meet Once Again

Storer Communications, believed to be considering a merger with Tele-Communications and two partners, said its directors took no action at a meeting Saturday but will reconvene today.

Tele-Communications was unable to line up firm financing or to set a firm price for its bid before the Saturday meeting, one source in the financial community said Sunday.

Miami-based Storer has been considering friendly merger proposals as one way to combat an insurgent shareholder group’s proposal to liquidate the company. As previously reported, the company is also said to be contemplating a self-tender offer for about one-third of the company’s shares, or a leveraged buy-out plan crafted by Kohlberg, Kravis, Roberts & Co., a New York investment banking firm.

Tele-Communications is believed to have lined up Knight-Ridder Newspapers and E. W. Scripps as two partners for its friendly acquisition proposal. Knight-Ridder and Scripps are said to be eager to acquire Storer’s seven television stations, while Denver-based Tele-Communications, the nation’s largest cable-TV operator, wants to take over Storer’s cable TV franchises, one source said.

Although no plan of action was announced Sunday, Storer issued a detailed defense of its earlier claims that the company’s value will double in four years if shareholders reject the liquidation plan advocated by Coniston Partners, a New Jersey investment firm that controls about 5.5% of Storer’s outstanding shares.

The five-page defense appeared to be Storer’s response to a legal action filed Friday by a Coniston-led group seeking to enjoin Storer and its chairman, Peter Storer, from “repeating unsubstantiated prediction of the future value” of the company. The Coniston group also asked a federal judge to enjoin Storer from its “unsubstantiated disparagement” of the liquidation proposal. A hearing is scheduled Tuesday in U.S. District Court in Manhattan.

In a letter addressed to shareholders, Peter Storer reiterated his earlier contention that a liquidation won’t result in a distribution of $90 or more per share to Storer’s shareholders, as the Coniston group has predicted.

The 56-year-old chairman provided a far more detailed analysis, however, than he made in a New York press conference last week when he told reporters that liquidation would result in about $60 per share.

In Sunday’s letter, Storer said that Coniston’s valuation would be reduced “by approximately $10.24 per share” because federal income tax laws would require the recapturing of certain depreciation and amortization deductions taken earlier if a liquidation occurs. “We estimate this recapture would amount to approximately $157 million in additional federal income tax and approximately $60 million in state income tax payments, after utilization of available tax credits and tax carry-forwards,” Storer said.

The Storer chairman also repeated his belief that the company might be subjected to capital gains taxes if the liquidation program is not concluded within one year, resulting in a further reduction of about $8.35 per share from Coniston’s estimate of the liquidation value.