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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 13, 1996
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Falcon Cable Systems Company, a California limited partnership
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation)
1-9332 95-4108170
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(Commission File Number) (IRS Employer Identification No.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
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(Address of principal executive offices) (Zip Code)
(310) 824-9990
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(Registrant's Telephone Number)
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ITEM 5. OTHER EVENTS.
As previously disclosed, the Partnership Agreement of Falcon Cable
Systems Company, a California limited partnership (the "Partnership") provides
that Falcon Cable Investors Group, the Partnership's general partner (the
"General Partner") shall use its best efforts to cause the Partnership to sell
all of the Partnership's cable systems between December 31, 1991 and December
31, 1996, the "termination date" of the Partnership. In addition, the
Partnership Agreement provides the General Partner or its affiliates the right
to purchase for cash substantially all of the Partnership's cable systems at
any time after December 31, 1991 without soliciting unaffiliated purchasers
(the "Purchase Right").
Pursuant to the Partnership Agreement, the price at which the Purchase
Right may be exercised is determined by reference to an "appraised value"
determined pursuant to an appraisal process set forth in the Partnership
Agreement (the "Appraisal Process"). The Partnership Agreement provides that
the "appraised value" is determined by the average of three appraisal
evaluations of the Partnership's cable systems and provides that one appraiser
is selected by the General Partner; one appraiser is selected by a majority
vote of the independent members of the Partnership's advisory committee; and
one appraiser is selected by the two appraisers already so chosen.
As previously disclosed, the General Partner, in its exploration of
the possibility of exercising the Purchase Right, initiated the Appraisal
Process. Also as previously disclosed, in accordance with the Appraisal
Process, the appraiser to be selected by a majority vote of the independent
members of the Partnership's advisory committee, the appraiser to be selected
by the General Partner, and the appraiser selected by the two appraisers so
chosen, were each selected earlier this year. The three appraisers are,
respectively, Malarkey-Taylor Associates, Inc., Kane-Reece Associates, Inc.,
and Waller Capital Corporation (the "Appraisers").
On March 11, 1996, each of the Appraisers delivered summaries of the
results of their appraisals which were filed as Exhibits 1, 2 and 3,
respectively, to the Partnership's Current Report on Form 8-K/A dated March 11,
1996, and are incorporated herein by reference. The full report of each Ap-
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praiser (together with the previously filed summaries, the "Appraisals") was
subsequently delivered to the Partnership, and each is filed as an exhibit
hereto, and incorporated herein by reference. Based upon the Appraisals, as of
December 31, 1995, the "appraised value" (as defined in the Partnership
Agreement) of all of the cable systems owned by the Partnership (the "Total
Systems") is $247.40 million (the "Total Systems Appraised Value"). The Total
Systems Appraised Value is calculated as the average of $283.23 million,
$245.29 million, and $213.67 million, the appraised value as of December 31,
1995 of all of the cable systems owned by the Partnership, as set forth in the
Appraisals delivered by each of Malarkey-Taylor Associates, Inc., Kane-Reece
Associates, Inc., and Waller Capital Corporation, respectively.
Based upon the Total Systems Appraised Value of $247.57 million, and
assuming a hypothetical liquidation of the Partnership on March 31, 1996, the
estimated cash distribution to unitholders would have been $9.17 per unit (the
"Hypothetical Estimated Per Unit Distribution") (based upon 6,398,913 units
outstanding). The Hypothetical Estimated Per Unit Distribution was calculated
assuming (i) net liabilities on the balance sheet of the Partnership, excluding
property, plant and equipment and intangible assets ("Net Liabilities") of
approximately $181.51 million (as of March 31, 1996), (ii) a Sale Fee equal to
approximately $6.19 million (2 1/2% of the Total Systems Appraised Value) and
(iii) satisfaction of all other liabilities of the Partnership required to be
satisfied in connection with the liquidation of the Partnership, each of which
the Partnership Agreement would require be paid prior to the distribution of any
remaining cash to unitholders. The Hypothetical Estimated Per Unit Distribution
is presented for illustrative purposes only and does not necessarily represent
amounts the Partnership could have distributed to unitholders on March 31, 1996
or any date thereafter.
The Appraisals each set forth certain matters considered by the
respective Appraisers. In connection with rendering their Appraisals, the
Appraisers performed a variety of financial analyses which are summarized in
the respective Appraisals. No limitations were imposed by the Partnership with
respect to the investigations made or the procedures followed by the Appraisers
in rendering their Appraisals. As described in the Appraisals, the Appraisals
are based upon numerous sources of information including data supplied by
Falcon, which included certain projections. The Partnership does not as a
matter of course make public any forecasts as to its future financial
performance. THE PROJECTIONS WERE PREPARED SOLELY FOR INTERNAL USE AND NOT
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF
THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND WERE NOT PREPARED WITH THE ASSISTANCE OF, OR REVIEWED
BY, INDEPENDENT ACCOUNTANTS. SUCH PROJECTIONS WERE PROVIDED TO THE APPRAISERS
SOLELY FOR THE PURPOSES OF THEIR APPRAISALS. NONE OF THE PARTNERSHIP OR ANY
PARTY TO WHOM THE PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE
VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED ON A VARIETY OF
ASSUMPTIONS RELATING TO THE BUSINESSES OF THE PARTNERSHIP, INDUSTRY
PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS WHICH
ARE SUBJECT TO SIGNIFICANT UNCERTAIN-
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TIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE PARTNERSHIP'S CONTROL,
AND, THEREFORE, SUCH PROJECTIONS ARE INHERENTLY IMPRECISE AND THERE CAN BE NO
ASSURANCE THAT THEY WILL BE REALIZED. ALSO, ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY FROM THOSE SHOWN IN THE PROJECTIONS. THE PARTNERSHIP IS NOT UNDER
ANY OBLIGATION TO UPDATE THE PROJECTIONS AT ANY FUTURE TIME.
Each of the Appraisers is a nationally recognized cable system
appraisal firm and is continually engaged in the valuation of cable systems.
Each of the appraisers from time to time provides valuation services to the
Partnership and its affiliates and receives customary compensation.
As previously disclosed, certain affiliates (the "Affiliates") of the
Partnership and its General Partner, including Marc B. Nathanson (the Chairman
of the Board, Chief Executive Officer, President and a director of Falcon
Holding Group, Inc., the General Partner's sole general partner) had made a
preliminary proposal (the "Proposal") to the independent members of the
Partnership's advisory committee with respect to an exchange transaction (the
"Exchange"). Under the Proposal, the Exchange would have taken place
immediately prior to the exercise by the General Partner or its affiliates of
their right to purchase for cash substantially all of the Partnership's cable
systems remaining after giving effect to the Exchange (the "Sale Systems"). In
the Exchange, substantially all of the Falcon Units owned by the Affiliates
would have been exchanged for a portion (by value) of the Partnership's cable
systems (the "Exchange Systems") equal to the proportion of total outstanding
Units exchanged by the Affiliates (the Affiliates would also have relieved
Falcon of an equal proportion of its total debt). On June 13, 1996 the
Affiliates informed the Partnership's advisory committee that they would not
pursue the Exchange.
In its Current Report on Form 8-K dated April 4, 1996, the Partnership
disclosed that on April 4, 1996, the Partnership, the General Partner and
certain of their affiliates (the "Falcon Defendants"), were served with a
complaint entitled Frank O'Shea, IRA v. Waller Capital Corp., et. al., case no.
BC147386 filed in the Superior Court of the State of California, County of Los
Angeles on April 1, 1996 (the "Com-
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plaint"), which Complaint was filed as Exhibit 99.1 thereto, and is hereby
incorporated herein by reference. On May 31, 1996, the Falcon Defendants filed
an answer denying the material allegations of the Complaint. The answer is
filed as Exhibit 5 hereto, and is hereby incorporated herein by reference.
On June 13, 1996, Falcon Holding Group, L.P. ("FHGLP"), the general
partner of the General Partner approved the exercise of the Purchase Right by
the General Partner. On that same date, the General Partner caused the
Partnership to enter into an Asset Purchase Agreement (the "Purchase
Agreement") with an affiliate of the General Partner, Falcon Cable Systems
Company II, L.P. ("New Falcon"), which is attached hereto as Exhibit 4 and is
hereby incorporated herein by reference. The description of the Purchase
Agreement in this Form 8-K is qualified in its entirety by the foregoing
reference thereto.
The Purchase Agreement provides that subject to the terms and
conditions set forth in the Purchase Agreement, the Partnership will sell to
New Falcon, and New Falcon will purchase all of the Partnership's right, title
and interest in the Total Systems (the "Purchase"). Pursuant to the Purchase
Agreement, New Falcon will pay the Partnership an amount equal
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to the Appraised Value of $247.40 million.
Unless waived by the parties, the Purchase will not be consummated
unless (i) any applicable waiting period (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been terminated without the commencement or threat
of any litigation to restrain the consummation of the Purchase; (ii) no order,
stay, judgment or decree shall have been issued by any court and be in effect
restraining or prohibiting the consummation of the Purchase in any material
respect; (iii) all consents required to be obtained in connection with the
Purchase shall have been obtained and remain in full force and effect and (iv)
the parties' representations and warranties are true and correct on the date of
the Purchase Agreement and the date the Purchase is consummated.
In addition, the obligations of New Falcon to consummate the Purchase
are subject to the receipt by New Falcon of financing in an amount necessary to
satisfy New Falcon's obligations under the Purchase Agreement. New Falcon
currently intends to obtain such financing through (i) the receipt of a capital
contribution from partners in New Falcon, and (ii) borrowings under a financing
facility (the "Facility") covering New Falcon and certain of its affiliates
(together, the "Falcon Group"). The Falcon Group has received commitments from
the lenders' agents under the Facility that would, under an amendment to the
Facility (the "Amendment"), permit New Falcon to obtain the financing necessary
to consummate the purchase of the Total Systems under the Purchase Agreement,
and on June 13, 1996, FHGLP approved the entering into the Amendment by the
members of the Falcon Group. However, the Falcon Group and the lenders under
the Facility have not yet entered into the Amendment, and under the Facility,
borrowing by members of the Falcon Group is subject to certain specified
conditions. Therefore, while it is expected that the Amendment will be entered
into, and as a result of the Amendment, New Falcon is expected to be able to
obtain sufficient financing to consummate the Purchase, there can be no
assurance that the Amendment will be entered into or that New Falcon will be
able to obtain sufficient financing to consummate the Purchase.
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Pursuant to the Purchase Agreement, the Partnership and New Falcon
have begun the process of obtaining regulatory approvals, including those
required pursuant to certain cable television systems franchises, federal
communications law, and the HSR Act.
The Partnership Agreement provides that the Partnership shall be
dissolved upon the occurrence of the sale or distribution of all or
substantially all of the assets of the Company, which will occur upon
consummation of the Purchase. The Partnership Agreement also provides that
upon the dissolution of the Partnership, the General Partner shall take such
actions as are necessary for the winding up of the affairs of the Partnership
and the distribution of its assets to the Partners pursuant to the provisions
of the Partnership Agreement. Accordingly, following the consummation of the
Purchase, the General Partner will wind-up the affairs of the Partnership in
accordance with the terms of the Partnership Agreement, including the
liquidation of the assets of the Partnership, the discharge of all of the
liabilities of the Partnership, and the distribution of the remaining assets of
the Partnership to its partners as appropriate.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
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1 System Appraisal of Falcon Cable Systems Company, as
of December 31, 1995, by Malarkey-Taylor Associates,
Inc., dated April 29, 1996.
2 System Appraisal of Falcon Cable Systems Company, as
of December 31, 1995, by Kane-Reece Associates,
Inc., dated April 29, 1996.
3 System Appraisal of Falcon Cable Systems Com-
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pany, as of December 31, 1995, by Waller Capital
Corporation.
4 Asset Purchase Agreement by and between the
Partnership and New Falcon, dated as of June 13,
1996.
5 Answer in the case of Frank O'Shea, IRA v. Waller
Capital Corp., et. al., case no. BC147386 filed in
the Superior Court of the State of California, County
of Los Angeles on May 31, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: June 13, 1996
FALCON CABLE SYSTEMS COMPANY
By: Falcon Cable Investors Group,
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Michael K. Menerey
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Michael K. Menerey, Secretary
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
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1 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by
Malarkey-Taylor Associates, Inc., dated
April 29, 1996.
2 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by Kane-
Reece Associates, Inc., dated April 29,
1996.
3 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by
Waller Capital Corporation.
4 Asset Purchase Agreement by and between
the Partnership and New Falcon, dated as
of June 13, 1996.
5 Answer in the case of Frank O'Shea, IRA v.
Waller Capital Corp., et. al., case no.
BC147386 filed in the Superior Court of
the State of California, County of Los
Angeles on May 31, 1996.
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