Comcast Bids for AT&T Broadband
NEW YORK (AP) - Comcast Corp. is offering $44.5 billion to buy AT&T Broadband with a hostile bid that would combine two of the nation's three biggest providers of cable TV and high-speed Internet access.
Philadelphia-based Comcast said Sunday it was revealing the offer to AT&T shareholders because direct talks with AT&T Corp. management had failed to produce an agreement.
Comcast is appealing directly to AT&T investors in hopes they'll pressure management to accept the offer before a shareholder vote scheduled for later this month on plans to spin off AT&T Broadband as an independent company.
``It's unfortunate that we were unable to continue our dialogue,'' with AT&T, Brian L. Roberts, president of Comcast, said in a statement. ``At this point, however, we believe that AT&T's board of directors should consider our proposal before a proxy statement ... is sent to AT&T shareholders later this month.''
The surprise offer came the day before the New York-based AT&T's spinoff of its wireless operation into an independent company, the first stage in a plan to break the communications conglomerate into five separate companies.
The biggest of those AT&T units is the sprawling cable operation that AT&T cobbled together with a $100 billion acquisition spree that began just three years ago.
The AT&T Broadband business that Comcast is trying to buy - the largest cable company in the United States - includes the very same MediaOne cable systems it was set to acquire two years ago before being foiled by a hostile bid from AT&T.
In addition to acquiring AT&T's cable systems for $44.5 billion, Comcast said it was also prepared to buy AT&T's sizable interests in two rival cable operators: a 25.5 percent stake in Time Warner Entertainment, the nation's second biggest cable company after AT&T Broadband, and a 30 percent interest in Cablevision.
AT&T issued a statement Sunday evening saying, ``We have no current plans to sell our broadband business, including this transaction proposed today by Comcast. We will analyze their proposal and respond in due course. We have recently had some conversations with them but no agreements have been reached.''
The proposed merger, which would give Comcast 22 million cable TV subscribers, would have been unthinkable before a recent court decision that overturned federal limits on the market share any one company can have.
The Federal Communications Commission is expected to propose new limits as early as this summer, but approval would take months. That leaves a window for mergers that might not have been approved before the court decision and might not be possible after the FCC makes its decision. However, the FCC could warn cable companies that they may be subject to the new rules even if their mergers are announced before those rules go into place.
Just how far along the merger discussions were before Comcast issued its offer was a matter of dispute on Sunday.
Comcast said the talks have been going on for months, and a source familiar with the discussions said a deal was close to being sealed several weeks ago.
But another source close to AT&T disputed that characterization, saying that the board never received a formal proposal from Comcast and that the merger talks had been going on for about a month.
``There was no agreement on anything and we were not close on the money or value part of it,'' the source said.
Shares of AT&T closed Friday at $22.24, up 26 cents, on the New York Stock Exchange, though its shares will be adjusted lower to $16.72 Monday to reflect the departing value of the wireless business that's being spun off.
Shares of Comcast common stock fell 15 cents to $41.85 in trading Friday on the Nasdaq Stock Market.
Comcast, the nation's third largest cable operator, said it was willing to buy the AT&T cable business with 1.0525 billion shares of its stock with a value of $44.5 billion based on its closing price Friday. It also would assume $13.5 billion in AT&T debt.
AT&T's original plan was to use cable TV for a direct link with millions of U.S. homes that might subscribe for bundles of service including AT&T long-distance phone service and high-speed Web connections. The plan unraveled, however, when the long-distance business began decaying faster than expected, eating into the revenue stream AT&T was depending on to acquire and upgrade aging cable systems for interactive services.
Comcast said it expects to generate savings of at least $1.25 billion annually upon the full merger of the two cable companies, with a potential to increase these benefits to between $2.6 billion and $2.8 billion annually.
Valuing its offer at more than $4,000 per cable subscriber, Comcast asserted that AT&T shareholders would receive a very substantial premium over published reports of the estimated value of AT&T Broadband.
Under the Comcast offer, AT&T shareholders would receive stock currently valued at $12.60 per AT&T share while retaining complete ownership of AT&T's traditional telephone and business services operations.
Comcast said published reports have valued those businesses at nearly $70 billion alone, while AT&T as a whole is currently valued at $83 billion.
That would mean the market is valuing AT&T Broadband at about $13 billion. However, the Wall Street Journal said in a March article that some analysts believed the broadband business was worth $60 billion on its own.
Comcast and AT&T have been involved in prior deals, including a recently closed transaction in which Comcast purchased a Baltimore, Md. cable system for about $518 million in cash.
On the Net: http://www.attbroadband.com
http://www.comcast.com
Originally published July 08, 2001.
