Biggest L.A. Cable TV Group Sold in $2.1-Billion Deal

Group W Cable, the nation’s third largest cable television operator and the biggest in the Los Angeles area, was sold Tuesday by Westinghouse Electric Corp. to a group of five cable companies in a deal valued at $2.1 billion.

Westinghouse said it signed an agreement to sell New York-based Group W Cable to a joint venture, which includes the top two cable operators in the country--No. 1-ranked Tele-Communications Inc. and American Television & Communications Corp., a subsidiary of Time Inc. The other firms in the group are Comcast Corp., Daniels & Associates and Century Southwest Communications Corp.

They will pay $1.6 billion in cash and assume $500 million in debts and taxes.

Group W Cable provides television signals to more than 2 million subscribers in 605 communities in 34 states. Its single largest base of subscribers--about 365,000--is in Southern California.

Group W Cable is part of Westinghouse’s Group W Broadcasting, which owns five television stations, six FM and six AM radio stations, including KFWB in Los Angeles, as well as television program production and syndication operations.

The sale of the cable unit involves 135 of the company’s existing 140 systems. Its two Chicago franchises, which are now being built, and several smaller systems were not included.

Analysts speculated that the new owners probably will divide up the Group W system among themselves.

“We don’t know how it will be broken up,” said Nicholas P. Heymann, an analyst with the New York investment house of Drexel Burnham Lambert, “but it appears that it is more than any one party wants to buy off at one time. The parts are more meaningful if they are broken up and added to existing cable operations . . . instead of running as one whole separate entity.”

Heymann said the buyers probably formed a joint venture because raising the $1.6 billion in cash was easier that way.

Michael Luftman, a spokesman for Time, said the new owners “have not made a final decision” about whether they will split up Group W Cable, “but we expect to before the closing of the deal.”

Pittsburgh-based Westinghouse first disclosed its plans to sell the cable unit last August. It also said then that it would buy back 25 million shares of its own stock as part of a corporate restructuring. By selling the cable unit and investing the proceeds in other businesses, Westinghouse hoped to increase its stock’s price, which was around $33.50 before the announcement.

The company said Tuesday that it has bought about 21 million shares of its stock so far, at an average price of $42.25 a share.

The stock closed Tuesday on the New York Stock Exchange at $44.25, down 37.5 cents, on a volume of 444,500 shares.

Westinghouse said the $1.6 billion in cash will be used to pay back short-term debt, as well as for restructuring its product-line and making future acquisitions. The company said it will have an after-tax gain of $500 million based on the current tax rate.

Last month, Westinghouse signed a memorandum of understanding to acquire independent television station KHJ-TV in Los Angeles for $313 million and is currently bidding for KPIX-TV in San Francisco.

Westinghouse Chairman Douglas D. Danforth said that he expects to complete the sale of the cable unit in mid-1986.

Westinghouse bought most of its cable operations for $650 million from Teleprompter in 1981 but the operation proved more troublesome for the company than anticipated. Analysts have said Westinghouse lost $50 million on the system in its first three years. Group W Cable finally moved into the black with a profit in the third quarter of last year.

It has been profitable since, Heymann said. He said he expects Group W Cable to generate $10 million to $15 million in operating profits this year and projected $30 million to $35 million in 1986 operating profits.