Adelphia’s Held Sale Talks

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The long-awaited auction for Adelphia Communications Corp. is set to begin shortly after Labor Day and could be concluded by the end of the year.

Adelphia hired two advisers for the sale last month — UBS Investment Bank and Allen & Co. — who will manage the sale process.

Adelphia said in a statement last Friday it will be soliciting bids both for the entire company and for select clusters to be announced at a future date. It is currently anticipated that preliminary indications of interest will be due in October.

Already, Adelphia has held informal discussions with several interested parties, the MSO said in a statement. It declined to identify them.

The Denver-based MSO filed for Chapter 11 bankruptcy protection in June 2002 and had hoped to emerge as a whole entity. But after filing a reorganization plan that would have given bondholders control of the company, creditors objected and forced Adelphia last April to explore a sale.

While Adelphia could still emerge from bankruptcy intact, Janco Partners cable analyst Matt Harrington said that the most recent announcement would make a sale more likely.

Although Adelphia could attract several suitors, including private equity investors, most analysts believe that Time Warner Cable appears to be the most logical bidder. Cox Communications Inc. had been considered a front runner for the assets early on, but Cox’s announcement last week that its largest shareholder — Cox Enterprises Inc. — has offered to buy the remaining shares it doesn’t already own and take the MSO private makes an Adelphia acquisition less likely.

One roadblock to an Adelphia deal could be the high price the assets are expected to attract, between $17 billion and $20 billion.

Although Adelphia is the fifth-largest MSO in the country, with 5.4 million subscribers, and has some attractive clusters in Los Angeles, Miami and Cleveland, a $20 billion price tag would value it at about $4,000 per subscriber. In contrast, Comcast, which has 21.5 million subscribers, is trading at under $3,500 per subscriber.

Some analysts have speculated that Time Warner Inc. could use Adelphia as a vehicle to take its cable division public without requiring Securities and Exchange Commission approval. Time Warner had proposed an initial public offering of its cable assets last year, but scrapped that plan after announcing an SEC investigation into accounting practices at its America Online Internet-service provider unit.

By merging its cable unit into an existing public company like Adelphia, Time Warner could take those assets public without needing SEC approval.

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