NEW YORK -- Time Warner Inc. said yesterday that it had agreed to acquire Cablevision Industries Inc. in a stock deal valued at $2.2 billion, a transaction that would let the company vie with Tele-Communications Inc. for the title of the nation's largest operator of cable systems.
The move is the latest in an aggressive cable strategy by Time Warner, which two weeks ago bought the cable properties of Houston Industries in a deal estimated at $2.3 billion.
In a meeting with analysts yesterday, Time Warner Chairman Gerald Levin indicated that the deal signaled that the company had completed its strategy of "clustering" its cable systems in particular areas, a strategy that permits it to offer telephone services as well as cable.
That means the company will not make any more acquisitions that might possibly weaken its balance sheet.
Once the Cablevision deal is complete, Time Warner will have 33 clusters, each with 100,000 subscribers or more, that will include 74 percent of its subscribers.
The 1.3 million subscribers of Cablevision, which is based in Liberty, N.Y., would give Time Warner a total of 11.5 million subscriber homes.
Time Warner said yesterday, in announcing the acquisition, that it was now the No. 1 cable systems operator. But later in the day, a Tele-Communications representative disputed the claim, saying that it had 11.65 million subscribers.
Also yesterday, Mr. Levin told analysts that the company was still working on a restructuring that would put its cable systems into a separate entity.
Perhaps more important, the restructuring would allow the company to regain control of its Warner Bros. studios and Home Box Office cable channel, both of which, together with most of its cable holdings, are now part of a Time Warner subsidiary in which the company has sold significant minority stakes.
While Mr. Levin said the final deal was still 12 to 18 months away, it was the first time he had publicly confirmed the widely rumored restructuring.
Time Warner also reported strong operating earnings -- before taxes, interest, depreciation and amortization -- for its fourth quarter.
What particularly pleased some analysts was an improvement during the quarter in the profitability of the company's cable systems cash flow, to $247 million from $242 million, despite cable reregulation.
The company said new subscribers, pay-television subscribers and advertising revenues had helped lift profits.
Time Warner's stock jumped $1.25 yesterday, to close at $39, in trading on the New York Stock Exchange.
David Londoner, a cable analyst for Wertheim Schroder, attributed a lot of the stock movement to Mr. Levin's apparent determination to restructure.
"They had not said anything officially until yesterday, when they acknowledged that they were aggressively moving to restructure," Mr. Londoner said. "Mr. Levin is determined to highlight the values of the entertainment and publishing businesses."
Andrew Marcus, who follows cable for Alex Brown Inc., said that "Levin emphasized with more conviction that it would restructure." And, he added, the stock also benefited from financial results. "It was the fastest-growing quarter on an earnings basis since the second quarter of 1993."
Mr. Levin reiterated the company's determination to sell some nonstrategic assets to cut debt, mentioning its 20 percent stake, or 54 million shares, in Turner Broadcasting System and 200,000 nonstrategic cable subscribers as well.
Time Warner already has indicated a willingness to sell its block of Turner shares, but never with a more determined intent to do so.
To pay for the acquisition of Cablevision, the company will issue 2.5 million shares of common stock, 3.25 million each of two new series of convertible preferred stock, with a liquidation value of $100 a share, convertible into a total of roughly 13.54 million shares of Time Warner common stock at a price of $48 a share. It will also assume Cablevision's $2 billion in debt.