TCI May Get 35% of Tri-Star in Sale of Chain

Tele-Communications Inc., the nation’s largest cable-television operator, may accept a 35% stake in Tri-Star Pictures as a $125-million partial payment for a movie theater chain it is negotiating to sell, industry sources said Wednesday.

The stake would mark TCI’s entry into the motion picture and television production business and place the Denver-based company on an equal footing in Tri-Star with Coca-Cola Co., which also owns 35%.

Tri-Star, for its part, would reduce its cash outlay for the movie theater chain that it recently agreed to buy for about $500 million. The 4-year-old studio also would gain a shrewd shareholder in TCI President John Malone, who has won Wall Street’s respect for capitalizing on the firm’s assets to expand his corporate reach.

As previously reported, Tele-Communications agreed in July of this year to acquire 51% of San Francisco-based United Artists Communications for $390 million in cash and notes and to offer to buy the rest on similar terms. UA Communications’ assets include the nation’s second-largest movie theater chain and 12th-largest cable-TV company.

Agreement Reached

Tri-Star Pictures disclosed a few days later that it had reached an agreement in principle with TCI to buy UA’s chain of 1,432 movie screens and other non-cable television assets for about $500 million in cash and securities, provided TCI acquired at least 80% of UA Communications.

In the intervening months, TCI has not acquired 80% of the San Francisco company nor completed its acquisition of the 51% stake, prompting speculation that the sale to Tri-Star might collapse. The deal seemed even more imperiled after Tri-Star agreed last month to buy a different movie-theater chain, Loews Theatre Management Corp., for about $300 million.

But Tri-Star Chairman Victor A. Kaufman insisted then that he would proceed with the UA acquisition.

“We’ve always said that we wanted the deal,” Kaufman said Wednesday, before declining further comment.

TCI’s Malone did not return a reporter’s telephone calls.

Tri-Star reported net income of $11.5 million for the nine months ended Sept. 30, up from $1 million in the same period a year earlier.