Forstmann to Get Genl. Insts. for $1.6 Billion

Forstmann Little & Co., a leading leveraged buyout concern, said today it will buy General Instruments Corp., cable TV and gaming equipment maker, in a deal it valued at $1.6 billion.

The buyout is one of the biggest merger transactions in a relatively dormant year for takeovers, and is especially unusual because leveraged buyouts of big public companies have become a rarity. In a leveraged buyout, a private group acquires the public stock of a company and replaces it with debt.

Forstmann entered into the definitive merger agreement to buy General Instruments Corp. for $44.50 a share cash, a premium over its $36.25 closing price on the New York Stock Exchange on Friday.

The stock in the transaction is worth $1.2 billion, and, with the assumption or refinancing of existing debt, the buyout is worth about $1.6 billion, Forstmann Little said.

The transaction is fully financed and not subject to any financing conditions.

Forstmann Little, led by the outspoken junk bond critic Ted Forstmann, has remained active in the leveraged buyout field while others have dropped out.

Forstmann has continued to buy companies by using more traditional types of financing. Most recently, the firm bought Gulfstream Aerospace from Chrysler Corp. for $825 million.

The market for junk bonds, high-yield, speculative corporate bonds, meanwhile, has been in disarray for more than a year, after a number of junk-bond-financed takeovers failed. Forstmann’s chief rival, Kohlberg, Kravis Roberts & Co., has turned its efforts to refinancing previous junk-bond funded deals like RJR Nabisco, instead of completing new ones.

General Instruments, which has grown steadily by selling high-tech systems for cable television, lotteries and betting parlors, has seen its stock languish in recent months.