HomeMy WebLinkAbout4.04 Assignment of Cable TV Franchise CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: November 24, 1986
SUBJECT Assignment of Cable Television Franchise
EXHIBITS ATTACHED Resolution
RECOMMENDATION/�?( . Adopt Resolution
FINANCIAL STATEMENT: The new Cable Company will be assuming all financial
obligations of the existing agreement.
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DESCRIPTION The City of Dublin enacted a Cable Franchise Ordinance
and Agreement with Tele-Vue Systems, Inc. , a wholly owned subsidiary of
Viacom International Inc. The franchise-- was negotiated through the joint
efforts of the Cities of Dublin, San Ramon, Pleasanton and Livermore.
The management of the Viacom system have advised the City that an investor
group led by existing senior management are proposing to purchase Viacom' s
operations . The transaction will result in the reorganization of the
corporate structure of Viacom. As noted, the City' s current Franchise
Agreement is between Tele-Vue Systems, Inc. If the change in ownership
occurs, the management has proposed the operation of the local franchise
under a newly created subsidiary, Viacom Cablevision of East Bay, Inc. Ms .
Myrt Jones, General Manager of the local operations, has indicated that the
new subsidiary is merely for internal organizational purposes and will have
no practical impact on the continued operation of the cable system. The
company has indicated that the changes will not result in an . alteration to
the operations or management of Viacom or our local cable service.
The information provided by Viacom to the City indicates that the change in
ownership should provide stability for the corporation given that they have
been the past target for hostile takeover activities. In this case, the
company will continue to be managed by many of the senior managers who are
currently with the company. The company has made arrangements with several
financing entities to provide the investment revenue necessary to complete
the transaction. The new company has agreed to be bound by all of the
applicable terms and conditions which are a part of our existing Franchise
Agreement . It is Staff ' s understanding that the Cities of Livermore, San
Ramon and Pleasanton have adopted similar resolutions. In addition, this
matter has been reviewed by the City Attorney and he foresees no problem
with the assignment of the existing agreements to the new corporation.
Staff would recommend that the City Council adopt the Resolution authorizing
the assignment of the Cable Television Franchise to Viacom Cablevision of
East Bay, Inc .
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COPIES TO:
ITEM NO.
RESOLUTION NO. - 86
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
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AUTHORIZING THE ASSIGNMENT OF THE
CABLE TELEVISION FRANCHISE
TO VIACOM CABLEVISION OF EAST BAY, INC.
WHEREAS, Tele-Vue Systems, Inc. , a wholly-owned
subsidiary of Viacom International Inc. ( "Viacom" ) , is franchised
to provide cable television service in Dublin; and
WHEREAS, an investor group led by Viacom' s senior
management is engaged in a transaction involving a merger between
Viacom and a newly-created corporation, as fully explained in a
letter dated October 24, 1986; and
WHEREAS, a new wholly-owned- subsidiary of Viacom, Viacom
Cablevision of East Bay Inc. , has agreed to assume and be bound by
all applicable cable television franchise terms and conditions in
Dublin.
NOW, THEREFORE, -BE IT RESOLVED that the City Council of
the City of Dublin hereby grants its approval to permit 1 ) the
transfer of control of Viacom to the investor group including
Viacom' s senior management, as set forth in the letters dated
October 24, 1986 attached hereto, and 2) the assignment of all
applicable cable television franchise obligations to Viacom
Cablevision of the East Bay, Inc .
1986. PASSED, APPROVED AND ADOPTED this 24th day of November,
AYES:
NOES :
ABSENT:
Mayor
ATTEST:
City Clerk
VViacom Cablevision
October 24, 1936
Mr. Richard Ambrose, City Manager
City of Dublin
6500 Dublin Blvd.
Dublin, CA 94560
Dear fair. Ambrose:
I am pleased to advise you that an investor group, led by existing senior
management of Viacom International Inc. , and with the backing of major
financial institutions, is engaged in a transaction which will result in the
reorganization of Viacom. The transaction will not cause any changes in the
operations or management of Viacom or in ya.ur local cable service.
The transaction will involve a merger between Viacom and a wholly-owned
subsidiary of a new corporation which has been established by the investor
group. Viacom will be the surviving corporation of this merger. For each
share owned, Viacom's shareholders will receive $37.00 in cash, a fraction of
a share of Exchangeable Preferred stock with an expected value of $7.00, and a
fraction of a share of Convertible Preferred stock in Viacom's new parent
corporation, convertible in the aggregate to 20% of the common stock. In
connection with this transaction, the assets of our cable television system in
your community will be assigned to a newly created subsidiary, Viacom
Cablevision of East Bay Inc. , which will be wholly-owned by Viacom
International Inc. This new subsidiary has been created merely for internal
organizational purposes and will have no practical impact on the operation of
the cable system.
Appropriate arrangements have been undertaken to assure the continued
financial strength of Viacom. As indicated by the attached letter,
Manufacturers Hanover Trust Company has agreed to act as agent for a revolving
credit facility with Bankers Trust Company as co-agent. Additional funding
for this transaction has been arranged through Donaldson, Lufkin & Jenrette
Securities Corporation, The First Boston Corporation, Drexel Burnham Lambert
Incorporated, and The Equitable Life Assurance Society of the United States.
This transaction will insure the continued stability, independence, and
growth of the corporation. As you may be aware, Viacom has in the past been
threatened by hostile takeover activities. Hostile takeovers, if successful ,
often result in upheaval , changes in management, and a breakup of -the target
corporation and piecemeal sale of its assets. In the case of a cable company,
this would be especially troublesome if a hostile raider lacked experience as
a cable operator, being insensitive to the particular demands of the
community. This proposed transaction, however, will allow Viacom management
6640 Sierra Lane, Dublin, CA 94568 • Mail: P.O. Box 2729, Dublin,CA 94568 • (415)828-8510
Mr. Richard Ambrose
October 24, 1906
Page Two
to continue to pursue its goals of excellence, as shown by its history of
superior cable television service, and will ensure the integrity and
continuity of Viacom.
As mentioned previously, a new wholly-owned subsidiary of Viacom, Viacom
Cablevision of East Bay Inc. , will assume all of the cable franchise
obligations in your community. This continuing commitment is evidenced by the
attached certificate from John W. Goddard, President of Viacom's cable
operations who will also serve as President of our subsidiary.
The purpose of this letter is to advise you of this transaction and to
request your approval for the transfer of control of Viacom International Inc.
and the substitution of Viacom Cablevision of East Bay Inc. as the cable
television franchisee. I am enclosing a draft resolution which may be of some
assistance to you in your consideratiolt of this matter. The vote of- the
shareholders approving this merger is expected to occur prior to December 30,
1906, so your prompt attention to this matter will be sincerely appreciated.
We will be contacting you in the immediate future to discuss the process to
complete this transaction.
Very truly yours,
y r t Jo4 9es
General Manager
CERTIFICATE
This .-All certify that Viacom Cabl evi si on of Ease Bay Inc. will assure
and be bound by all of the applicable cable franchise terms and conditions in
Dublin, California following the transaction involving the merger of Viacom
International Inc. with a new corporation, of which Viacom will be the
surviving corporation.
W. Goddard
President
October 24, 1936
Ronald Lightstone
Senior Vice President October 24, 1986
Corporate and Legal Affairs
To whom it may concern,
I am pleased to confirm that an investor group consisting of members of
the senior management of Viacom International Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, The First Boston Corporation, Drexel
Burnham Lambert Incorporated, The Equitable .Life Assurance Society of the
United States and certain other investors has received certain commitments
for the financing of the acquisition of Viacom International Inc. , subject
to the satisfaction of certain terms and conditions as follows:
1. The Equitable Life Assurance Society of the United States has
agreed to purchase: certain Junior Subordinated Debentures in the
principal amount of $250,000,000; certain Exchangeable Preferred
Stock in the face amount of $40,000,000; and certain common stock
for $50,000,000.
2. Donaldson., Lufkin & Jenrette Securities Corporation, First Boston,
Inc. and Drexel Burnham Lambert Incorporated are highly confident
of their ability to raise approximately $1,000,000,000 from the
sale of debt and equity securities in connection with the
acquisition of Viacom International Inc.
3. Manufacturers Hanover Trust Company ("MHTC") has agreed to
participate in, and act as agent for, a secured revolving credit
facility in the original principal amount of $1,350,000,000 (the
"Credit Facility") to be made available for the principal purpose
of financing the acquisition of Viacom International Inc. MHTC
will provide up to $504,000,000 of the Credit Facility. Bankers
Trust Company ("BTC") will act as co-agent and will provide up to
$300,000,000 of the Credit Facility.
4. MHTC and BTC have also agreed to use their best efforts to assist
in forming a group of commercial banks to provide the remainder of
the Credit Facility. MH1C and BTC have received expressions of
interest in participation by various commercial banks in excess of
the remaining original principal amount. '
Very truly yours,
J �
Viacom International Inc.1211 Avenue of the Americas,New York,N.Y.10036.Tel.(212)575-5175