Adelphia Accepts Time-Warner/Comcast Offer In Principle

Apr 8, 2005  •  Post A Comment

The long-awaited auction for Adelphia Communications all but ended late last Thursday with the company and its creditors accepting in principle a $17.6 billion cash and stock offer from Time Warner Inc. and Comcast Corp.

While final terms and a full agreement have yet to be reached, a report in The Wall Street Journal on Friday said the deal calls for Time Warner and Comcast to put up $12 billion in cash and more than $5.6 billion in stock that would be issued in a new company created by the combination of Time Warner Cable and Adelphia.

Sources familiar with the matter said that the companies were still perhaps a week to 10 days away from being able to officially announce that an agreement had been reached, which leaves open the possibility of rival bids from Cablevision Systems Corp. and a private-equity team led by Kohlberg Kravis Roberts & Co. to swoop in.

However, people familiar with the matter confirmed that the Time Warner-Comcast team tweaked their original offer to placate Adelphia creditholders who were worried that the stock portion of the deal might fall below a certain price. While the Time Warner-Comcast bid did not provide a price guarantee, the offer was adjusted to provide creditors with more shares in the new company.

Spokespeople for Adelphia, Comcast and Time Warner declined to comment.

Though the Time Warner-Comcast bid had been seen as the likely winner in the race for Adelphia, things took a strange twist earlier this week when Cablevision submitted a $16.5 billion all-cash bid. Though Cablevision had been rumored to be preparing to throw in with KKR’s offer, the company surprised Wall Street by supplying its own offer.

Most analysts largely dismissed the bid, noting that Cablevision lacks the synergy opportunities that the Time Warner-Comcast bid has. Cablevision’s systems are located mostly in the New York City area, while Comcast and Time Warner each own systems near markets where Adelphia does business.

Another factor motivating Comcast and Time Warner to come up with a winning bid: Both companies are looking for the Adelphia purchase to assist them in unwinding Comcast’s 21 percent stake in Time Warner Cable in a tax-efficient manner. Plans call for Comcast’s stake to be exchanged for cable systems in markets near where Comcast does business.