United Artists Entertainment Agrees to Merger : Media: It will become a subsidiary of Tele-Communications Inc., the nation’s largest cable-TV firm.

United Artists Entertainment Co. agreed Friday to a sweetened merger offer from Tele-Communications Inc. of Denver.

The revised deal calls for 65 million shares of United Artists’ Class A and Class B common stock to be converted into Tele-Communications Class A stock at a ratio of one share to 1.02 shares.

Tele-Communications’ previous proposal, announced May 1, had offered 0.95 share for each outstanding share.

TCI said negotiations with lawyers for shareholders who filed lawsuits after announcement of the merger proposal led to the new exchange figure.

TCI said the plaintiffs agreed to settle their actions after being advised of the new terms.

The outstanding shares of UAE’s preferred stock will be converted into a comparable preferred stock to be issued by TCI.

The cash part of the deal would be valued at $142.5 million, covering payments for 30 million units, or $4.75 each, for rights to tender United Artists stock. Those units date from 1988, when United Artists bought United Cable in a stock-and-rights deal.

Under the deal, which has been approved by the directors of both companies, United Artists will become a wholly owned subsidiary of Tele-Communications, which already holds 54% of the stock.

TCI is the nation’s largest cable TV system operator with 8.5 million basic subscribers, including UAE’s 2.7 million subscribers.

The formal closing of the transaction is expected later this year.

TCI closed at $15.125 per share in over-the-counter trading Friday, down 75 cents.

Shareholders for both companies must approve the merger, and TCI stockholders also must approve an increase in the number of authorized shares of stock, the companies said in their announcement.

United Artists lost $177.5 million on revenue of $1.45 billion last year, with $683.1 million in revenue from theatrical operations and $754.1 million from cable operations. Cable companies traditionally use cash flow to measure profitability and post large losses because of the costs of constructing new cable systems.

Tele-Communications’ cable systems cover more than 10 million homes, or about 25% of cable-TV subscribers, through the Heritage, TCI, UAE and WestMarc cable systems.

The company also owns 50% of the American Movie Classics and the Showtime and Movie Channel networks as well as a 21% stake in Turner Broadcasting Systems Inc. of Atlanta.

Both companies are based in Denver.

Tele-Communications has said the merger will save the company the costs of running two publicly held companies, costs that have been estimated at as much as $40 million annually.