Cable Consortium Pledges to Buy SCI Holdings

A consortium of leading cable television operators has signed a letter of intent to acquire SCI Holdings, parent of the former Storer Communications, for an estimated $2.9 billion.

SCI Holdings, based in Miami, has 1.45 million cable television subscribers in 12 states, mostly in the East. It was formed after Storer Communications was taken private in 1985 by Kohlberg, Kravis, Roberts & Co. in a leveraged buyout for $2.5 billion.

The consortium is made up of three fast-growing cable operators--American Television & Communications, the nation’s second largest cable firm; Comcast, the nation’s seventh-largest cable firm, and Taft Cable Partners, a partnership of Tele-Communications and Texas investor Robert M. Bass.

It was a nearly identical group that purchased the Group W Cable unit of Westinghouse Electric two years ago. That group--ATC, Comcast and Tele-Communications--paid $1.6 billion for Group W, which had 1.9 million subscribers.

Split-Up Not Expected

Almost immediately after the Group W acquisition, the buyers split up the company and took various pieces into their own cable systems.

However, the buyers probably won’t be able to split up SCI Holdings cable systems, at least not immediately. As a result of a change in tax laws that came about last year, the consortium will probably have to keep SCI together for a certain period of time, possibly as long as five years, said Paul Kagan of Paul Kagan & Associates, a Carmel cable industry analysis firm.

The effect of the tax laws and SCI’s $2.4-billion debt made it a hard company to sell, said Kagan. “There was really just one potential buyer, this consortium,” he said.

Kagan estimated that the consortium is paying $2.9 billion, including the assumption of debt, for SCI Holdings, or about $2,000 for each cable subscriber. Kagan said Kohlberg, Kravis probably wanted to get $2,200 for each subscriber.

Even so, the price the consortium is paying for SCI Holdings is about double the amount paid for Group W, reflecting the increased value of good cable systems, said Kagan.

SCI Holdings declined comment on the deal, which was announced Thursday. The price wasn’t disclosed. Its executives couldn’t be reached for comment on Sunday.

Divestment Completed

Earlier this year, SCI Holdings sold its television broadcast properties for about $1.37 billion.

Kagan said the sale of SCI would complete the divestment of all the Storer properties that Kohlberg, Kravis acquired in 1985 at an estimated profit of $1.8 billion.