Allen, Comcast Look to Settle Up - Multichannel

Allen, Comcast Look to Settle Up

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Paul Allen is seeking a way to satisfy a debt to Comcast Corp. while also pumping needed cash into Charter Communications Inc.

Sources familiar with the matter said Charter chairman Allen's Vulcan Ventures Inc. is negotiating with Comcast regarding the Philadelphia-based MSO's stake in a Charter subsidiary that Comcast can compel Allen to buy.

Vulcan and Comcast said last Monday they extended the deadline for the "put" rights to expire by 30 days, beyond April 14.

Comcast received the put rights from AT&T Broadband, which, in turn, got them when Bresnan Communications sold out to Charter in 2000.

The parties are believed to be proposing a three-way transaction in which Comcast would put the membership units to Allen and, in a simultaneous transaction, Allen would pay Charter $725 million for certain cable systems, and then transfer them to Comcast.

Based on system valuations of about $3,000 per subscriber, the Charter systems would likely involve about 240,000 customers.

The talks were first reported in The Wall Street Journal.

One source familiar with the matter said the systems that could be included are not firmly set yet.

Charter has systems in several markets near Comcast clusters. They include: Seattle; Portland; Denver; Colorado Springs; Dallas/Fort Worth; Los Angeles; Fresno, Calif.; Grand Rapids, Mich.; Atlanta; Sacramento, Calif.; San Francisco; Minneapolis; Salt Lake City; and Boston.

The source said its unlikely Charter would sell out of one of its larger markets, such as Los Angeles.

The deal could please everyone. Allen gets the membership units, convertible into Charter common stock; Charter gets a cash infusion to pay down debt; Comcast gets contiguous subscribers. And by organizing it as a swap of assets of equal value, Comcast would avoid a hefty tax bill, estimated by one source to be about $200 million.

"The whole strategy here is to get something that is more tax-efficient than cash," the source said.

The source familiar with the situation said the two companies are in preliminary negotiations, the three-way arrangement might never get done and Allen could end up paying Comcast cash.

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