Competing Cox, AOLTW offers rebuffed

After weeks of talks and a hornet’s nest of rivaling bids, Comcast Corp. has finally won the hand of AT&T Broadband in a deal valued at $72 billion, creating the country’s largest cable TV carrier with more than 23 million subscribers nationwide.

Comcast, which had failed in a $44.5-billion hostile bid to acquire the rival cable giant last July, won the day after a marathon meeting of AT&T’s board Wednesday soldiered through at least three competing offers from Comcast, Cox Communications and AOL Time Warner.

All three companies had submitted bids to meet a deadline earlier this month — only to be rebuffed, reportedly in part over the size of the offers involved. The AT&T board collected a set of revised bids last Friday from all three companies.

Major points of the Comcast deal:

  • AT&T will spin off AT&T Broadband and simultaneously merge it with Comcast, forming a new company to be called AT&T Comcast Corporation.

  • AT&T shareholders will receive approximately 0.34 shares of AT&T Comcast Corporation for each share of AT&T they own (subject to adjustment based on the number of AT&T shares at closing). Comcast shareholders will receive one share of AT&T Comcast Corporation for each Comcast share they own. AT&T shareowners will own a 56 percent economic stake and about a 66 percent voting interest in the new company. The Roberts family, which owns Comcast Class B shares, will control one third of the new company’s outstanding voting interest.

  • AT&T Comcast Corporation’s assets will consist of both companies’ cable TV systems, as well as AT&T’s interests in cable television joint ventures and its 25.5% interest in Time Warner Entertainment, and Comcast’s interests in QVC, E! Entertainment, The Golf Channel, and other entertainment properties.

It was ambiguous what role, if any, was played by Microsoft in the deal. The software giant had offered financial support from its $37-billion cash reserves to help both Cox and Comcast in their negotiations, with an eye toward slowing the growth of AOL-TW’s media empire.

Microsoft had also offered to back AT&T Broadband itself with several billion in funding, should the company have chosen to continue on alone or spin itself off as a separate entity — plans that were still very much on the table going into Wednesday’s meeting.

The Comcast-AT&T deal will still have to pass muster with U.S. regulatory authorities, who have been increasingly skeptical of major consolidation deals in the media sector. However, one industry watcher put the deal’s chances of passage at 90%, noting that it would likely find more favor than a deal with the far larger AOL Time Warner cable system.

“At the end of the day a creative solution could be done in which Comcast and AT&T would sell off properties in some markets,” said the Carmel Group’s Jim Stroud. “I think Comcast is really looking just at the jewels of the AT&T crown here.”

Cable industry observers said Philadelphia-based Comcast had been a favorite to win the merger race because of the company’s successful track record building up its 8.4-million subscriber system. The company was also seen as a good fit because it was looking into ways of pursuing telephony over its cable network — a strategy long favored by AT&T topper C. Michael Armstrong.

Armstrong spent more than $100 million building AT&T into the largest cable operator in the U.S. with nearly 14 million subscribers, mainly through the acquisition of former giants TCI and MediaOne. Exec’s vision for the unit was to offer an array of next-generation digital services, including digital cable TV, broadband Internet and cable telephony.

However, the company has not performed up to expectations, falling into tens of billions in debt from Armstrong’s buying spree.

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