Adelphia Sold to Time Warner, Comcast

Apr 21, 2005  •  Post A Comment

Time Warner and Comcast have won the closely watched and heavily fought battle for Adelphia Communications, with the two cable giants agreeing to pay $17.6 billion for the bankrupt cable operator.

As part of the deal reached Thursday, Time Warner and Comcast will swap cable systems in a related transaction in which Comcast will unwind its 21 percent stake in Time Warner’s cable unit.

Pending regulatory approvals and the OK from the bankruptcy court judge presiding over Adelphia, Time Warner will gain nearly 3.5 million basic cable subscribers and emerge as the leading cable operator in Los Angeles. Comcast, meanwhile, will add about 1.8 million basic cable subscribers, enhancing existing clusters in the Washington area, Florida, Massachusetts and Pennsylvania.

Specifically, Time Warner and Comcast will pay $12.7 billion in cash and Time Warner will offer up 16 percent of its cable unit, which will be spun off into a publicly traded company. The companies value the stock portion of the deal at about $5 billion.

Further, Time Warner will pay Comcast $2 billion in cash and hand over about 750,000 cable subscribers in exchange for Comcast’s 21 percent stake in Time Warner Cable. Meanwhile, Comcast will hand over about 1 million subscribers, including those who are part of a joint venture in Los Angeles between Comcast and Adelphia.

A pair of joint ventures in Kansas City, Mo., and Texas, under which Time Warner and Comcast each own 50 percent stakes, are not impacted by Thursday’s transaction.

In acquiring Adelphia, Time Warner and Comcast closed a storied sales process that at one point attracted well over 20 suitors, including Cablevision Systems, which at the 11th hour swooped in with first a $16.5 billion all-cash offer and later a sweetened $17.1 billion offer. Though most analysts viewed Cablevision’s last-minute bid as a long shot, it raised the possibility that Time Warner and Comcast, long viewed as the frontrunners, might be in for a protracted fight for Adelphia.