Arlington Telecommunications Inc., which holds Washington area's oldest major cable-TV franchise, said yesterday it has agreed to sell its Arlington operation to Gustave Hauser, the former chief executive of Warner-Amex Cable Communications, and Odyssey Partners, a New York investment concern, reportedly for $33 million.
The transaction must be approved by Artec's shareholders, the Arlington County Board and the Federal Communications Commission. Announcement of the proposed sale took members of the Arlington board by surprise and the panel's chairman, Ellen M. Bozman, said the board, which must approve any change in the cable-TV franchise, will hold a hearing on the sale within 60 days.
The prospective buyers said they plan no major changes in the operations or services offered by the system, which is known commercially as Metrocable and has a history of financial difficulties.
Officials say Artec made a small profit for the first time in 1982, four years after launching operations and expects to make money again this year. Two years ago, faced with high interest rates and a turbulent financial market, the firm was granted a 14-year extension of its franchise, until 1995, a move that Artec executives sought as a way to prevent potential bankruptcy.
If the sale is approved, Artec would be the second large cable franchise in the Washington area to be sold in the past two years. In late 1981 Alexandria Cablevision Inc., another locally organized cable firm that encountered financial troubles, was sold to a subsidiary of The Chicago Tribune for $16 million.
Seventy-seven local investors own slightly more than half of Artec; a subsidiary of General Electric Co. holds the remaining portion. It is unclear how much the stockholders will receive from the sale. "It will be a fair return, but not an outstanding return," said John D. Evans, Artec's executive vice president.
The company, which was awarded the franchise in 1972 but did not begin operations until 1978, built its system for about $11.5 million. It reaches about 27,000 cable subscribers out of a possible 70,000 dwelling units that have access to the system.
Evans said that although there had been bids for Artec from "numerous people" in recent years, several factors led to the decision to sell to the Hauser-Odyssey group. The GE subsidiary decided that the investment had matured and it became interested in selling its 5 1/2-year-old minority interest, Evans said.
Evans, who will continue to run the system, also said that Hauser's background in cable technology and Odyssey's financial resources will enable Artec "to position the company strategically for long-term competition with competing entertainment, video and digital services."
For Hauser, who ran Warner-Amex, the Warner Communication Inc.-American Express Co. partnership, for a decade before leaving the firm early this year as a result of pressures from two parent companies, the purchase represents his first major move back into cable. He has established Hauser Communications Inc. to handle his communications investments.
Ownership of the system also will give Hauser increased visibility in Washington where he has become one of the cable industry's leading spokesmen and lobbyists.
Odyssey Partners is a well-known privately owned investment company making its first plunge into the cable business. Consisting of three former partners in Oppenheimer & Co., Jack Nash, Leon Levy and Lester Pollack, Odyssey has been a visible and controversial participant in a set of recent proxy fights. In particular, the firm lost a highly publicized shareholder fight in which it sought to win approval of a plan to break up Trans World Corp., the airline and travel service company.
Although the Arlington board cannot block the stock sale, it must approve any transfer of Artec's license. Among the conditions for the company's franchise award was a provision permitting the county to require new owners to state their intention to abide by the original agreement's terms. The county also can ask for new terms and conditions when the ownership changes.
Arlington board members were briefed on the proposed sale by Artec executives during the past two days. "The board has an obligation to take a look at this and make sure the new ownership can live up to its obligations under the certificate and to the community," said John G. Milliken, the board's vice chairman.