Flextech in pounds 200m TV assets deal: United Artists interests bought to raise profile in satellite and cable

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The Independent Online
FLEXTECH, the satellite television and cable company quoted on the Unlisted Securities Market, is acquiring the European programming assets of United Artists European Holdings. As part of the deal, the American parent of UAEH will receive a 60.4 per cent stake in the company worth just over pounds 200m.

The enlarged business will be a significant player in the nascent UK cable and satellite television industry. UAEH's parent is the cable company TCI, which has a dollars 3.6bn turnover and will now gain a firm foothold in Britain.

Flextech's shares were suspended at 379p on Thursday night, up from 175p just before the intention to strike a deal with UAEH was announced in late October.

It will not, however, pay a dividend for any of the years from 1993 to 1995. This disappointed some analysts, who had been forecasting a 1993 payout of around 0.75p, compared with 0.5p in 1992.

The shares will stay suspended until after an extraordinary general meeting at the beginning of February. The importance to Flextech of the merger with the UAEH interests could be largely in the price already, brokers suggested.

The company has interests in several satellite channels, including the Children's Channel and the Family Channel, whose US equivalent is headed by the television evangelist Pat Robertson. Both go out on BSkyB. Children's Channel programmes are also broadcast in Benelux and will go on offer in other European countries in 1994.

If the proposed merger is approved by shareholders, Flextech will have an interest in five of the 12 channels in the basic Sky programme package.

Flextech also has interests in several UK cable franchises through its control of the cable company IVS, as well as stakes in a programme distributor and a home shopping channel. It divested its oil service businesses in 1992 to become a pure media company.

Flextech made a loss of pounds 2.3m in the six months to June 1993, while in the 10 months to the end of October 1993 the European programming assets of UAEH lost pounds 10m.

The company admits that the UK satellite and cable industry is at an early stage of development, so growth prospects are uncertain. However, the fixed costs of supplying programmes are high, so once the number of subscribers reaches a certain point the additional revenues are mostly profit.

About 15 per cent of households in the UK receive cable or satellite television. The proportion could reach 40-50 per cent by the turn of the century, according to industry estimates.

Roger Luard, chief executive of Flextech, said: 'We have a unique business opportunity in Britain, and a tie-in with a company which has a wonderful track record.'

The deal announced yesterday will also bring Flextech extra financing worth up to pounds 36.5m, which Mr Luard described as a 'very important element'.