Tele-Communications Inc. said Friday its board and Liberty Media Corp.'s board agreed in principle to combine the two companies.
In a separate announcement, Viacom Inc. said the news will not affect its plans to acquire Paramount Communications Inc.TCI said the transaction would be structured as a tax-free exchange of class A and B shares of both companies for like shares of a to-be-formed holding company, as yet unnamed.
Under the deal, TCI shareholders will receive one share of the new company for each of their shares.
Liberty shareholders will receive .975 shares of the new company for each of their shares.
The transaction is subject to the approval of both sets of shareholders, as well as various regulatory approvals and other customary conditions.
Liberty Media was spun off from Tele-Communications in 1991 to prepare for compliance with expected Federal regulations limiting vertical and horizontal concentration in the cable television and programming industries.
Those regulations, now in effect, result in attribution of Liberty's interests to TCI for purposes of such limits.
It is the policy of both Liberty and TCI to comply strictly with those rules, and the combined companies currently comply.
However, the companies said the boards approved the combination because it is difficult for the government and themselves to monitor continued regulatory compliance when the two companies are operating separately.
TCI and Liberty said the strategic objective of the resulting company would remain the same - to give its customers more choice and personalized control over the television of tomorrow.
Meanwhile, Viacom Inc. said "TCI's action has no effect on the agreed Paramount Viacom transaction, which will be completed."
"The TCI move merely confirms what we have known all along - QVC is just a stalking horse for TCI and John Malone. The announced intent of TCI to reacquire Liberty Media is one more calculated step in Malone's monopolistic endeavors and underscores the issues and concerns detailed in our pending lawsuit," Viacom said.