3rd-Largest Cable Operator Buys No. 15 : Television: Continental Cablevision will acquire Providence Journal system in a $1.4-billion deal.

Continental Cablevision Systems, the country’s third-largest cable operator, has agreed to acquire Providence Journal Co.’s cable systems, the 15th-largest, in a transaction worth $1.4 billion, the companies said.

Continental is paying for the systems with its Class A common stock and is assuming $755 million of debt for a total cost of $1.4 billion. Now privately held, Continental expects to go public as the result of the Providence acquisition.

The merger of Continental and Providence Journal’s cable systems will create a combined system of 4 million subscribers.

“The price they are paying is in line with current valuation of cable assets, which seems to be near $2,000 a subscriber,” said Jackie Popp, high yield analyst with Duff & Phelps.

Trygve Myhren, Providence Journal president, told Bloomberg three weeks ago he was negotiating a merger with Continental Cable.

Providence Journal’s cable operations, which serve more than 750,000 homes, include Colony Communications Inc., Colony Cablevision, Copley/Colony and King Videocable Co.

Continental Cable serves 3.1 million subscribers in 650 communities.

“Providence’s properties are in pretty close proximity to existing Continental systems,” Popp noted. “It continues their strategy of clustering.”

Before the merger is completed, tentatively in mid-1995, Providence Journal will buy out Kelso & Co., its partner in the King joint venture. The cable assets from this joint venture will go to Continental, and Providence Journal will acquire Kelso’s 50% stake in the venture’s five broadcast television stations.

“The Providence Journal Company’s cable systems are a very good fit with Continental’s operations,” said Amos B. Hostetter Jr., Continental’s chairman and chief executive.

“Of all the operations in the cable industry, their operations are closest to Continental’s in geography, management philosophy, technology and commitment to customer service,” he said.

Providence Journal Chairman and Chief Executive Stephen Hamblett said the sale will help restructure Providence Journal’s operations to focus on newspapers, broadcast television and video programming.

Phil Sirlin, an analyst with Wertheim Schroeder, said the merger fits in with a broader plan involving the merger of cable and telephone businesses.

Time Warner Entertainment, which investment bankers said is negotiating to acquire Cablevision Industries, is partly owned by U S West.

U S West also is negotiating to acquire Continental Cable, according to investment bankers.

The combination of Providence Journal, Continental Cable, and Cablevision Industries would give U S West enough subscriber base in the Northeast to provide telephone service in competition with Nynex, Sirlin said.

“The Continental piece is growing, which will in turn become part of a larger U S West puzzle,” Sirlin said.