Inside Wall Street
POISED FOR A TELECOM SELL-OFF
Once known as Commonwealth Telephone--a tiny Pennsylvania carrier--C-TEC (CTEX) is now one hot property: Since branching out into cable television and long distance, it has attracted sophisticated investors. Shares have zipped from 21 in early November to 30. And the climb is far from over, some say.
The reason: Some big telecom and media outfits have expressed interest in buying C-TEC's Cable System unit as well as Commonwealth Telephone--now a C-TEC subsidiary.
In cable TV, C-TEC has 300,000 subscribers in Michigan, New Jersey, and New York. It also holds a 40% stake in a Mexican cable company. Commonwealth serves more than 240,000 regular phone lines in Pennsylvania and resells service to other states, as well--and provides long-distance phone service to 100,000 residential and 14,000 business customers.
"The company is well into the process of selling its cable operations and has initiated sale of the telephone business," says Brian Warner of Performance Capital, a New York hedge fund that is accumulating shares.
Based on the private-market value of its assets, C-TEC is worth $45 to $48 a share, figures Warner. The company has hired Merrill Lynch to evaluate ways to boost shareholder value.
The move to sell off its assets--rather than acquire other companies for fatter revenues--evidently carries the blessing of C-TEC's big shareholders, including Peter Kiewit Sons, which owns 40% of the stock; value investor Mario Gabelli, with 23%; and Sequoia Fund, with 9%.
One analyst suspects that TCI, Nynex, or Comcast, a company that has worldwide interests in cable television, telecommunications, and TV programming, will end up buying all or part of C-TEC's assets.
"Management is a shareholder-driven group--they're looking to maximize the stock's value," says Warner. He notes, for instance, that 38-year-old CEO David McCourt has bought stock worth $35 million at an average of 27 1/2 a share. Therefore, "McCourt is motivated to look after stockholders' interests," argues Warner. C-TEC is expected to have sales of $314 million in 1995 and $362 million next year, estimates analyst Bruce Roberts of Ladenburg Thalmann.BY GENE G. MARCIAL