Adelphia finds two buyers
NEW YORK — Exactly one year after Adelphia Communications Corp. put itself up for sale, it found not one successful suitor but two.
Time Warner Inc. and Comcast Corp., already the two largest cable TV companies in the country, expanded their lead even more Thursday with a long awaited deal to jointly acquire Adelphia’s 5.3 million cable subscribers.
The $17.6 billion cash-and-stock deal marks the first major acquisition for Time Warner since the disastrous merger with AOL was hatched in 2000.
It also clears the way for Adelphia to emerge from bankruptcy following a scandal of accounting fraud and corporate looting by the Colorado-based company’s founding family, the Rigases. The Rigases weren’t part of the deal announced Thursday and don’t stand to benefit from it.
In making the deal, Time Warner will also wind up spinning out its cable subsidiary to public shareholders, while retaining control over the business. That will give Time Warner a separately traded stock it can use to make other acquisitions in cable.
The deal must still be approved by regulators and a bankruptcy court, but company officials and analysts did not anticipate significant hurdles to the deal closing. The companies said the multipart deal could take up to another year to close.
Time Warner CEO Dick Parsons, speaking to reporters on a conference call, described the deal as an “elegant, albeit complex” transaction that would allow the company to grow its cable TV business.
The joint bid from Time Warner and Comcast had long been favored to beat a last-minute bid by Cablevision Systems Corp., a New York-area cable provider. Cablevision has been wracked by internal turmoil and a public showdown with New York Mayor Michael Bloomberg over plans to build a football stadium in Manhattan.
Asked about the possibility that Time Warner’s deal could face a challenge from Cablevision or another suitor, Parsons said: “At this point in time, the fat lady has sung.”
The deal further consolidates the power of the top two companies, enabling them to move more quickly to expand into lucrative new businesses such as high-speed data transmission, video on demand, telephone service and digital video recorders.
Craig Moffett, an analyst with Sanford C. Bernstein in New York, said the deal would “create an ever more stark difference between the haves and the have-nots” in the cable industry.
Some smaller cable companies such as Cablevision have been successful at rolling out premium services such as Internet service to their customers, but others haven’t moved as quickly.
In a presentation to investors, Time Warner executives said they expected to be able to increase the offerings of advanced video services to Adelphia subscribers as they spread out the cost over a larger base of customers.
Time Warner and Comcast will pay $12.7 billion in cash and 16 percent of the stock in Time Warner’s cable subsidiary, to get Adelphia subscribers. A source close to the deal but speaking on condition of anonymity valued the stock part of the payment at $4.9 billion. Time Warner and Comcast will also swap cable customers.
Philadelphia-based Comcast will give back its 21 percent interest in Time Warner Cable and pay about $1.5 billion in cash.
Investors applauded the news that a final deal had been reached, sending Time Warner’s shares up 60 cents or 3.5 percent to $17.53 on the New York Stock Exchange, while Comcast’s shares rose 83 cents or 2.6 percent to $32.32, on the Nasdaq Stock Market.