Comcast Offers to Buy AT&T Broadband


Comcast Corp. sprung an all-stock offer for AT&T Broadband Sunday after previously undisclosed talks on combining those MSOs broke off.

Comcast offered AT&T Corp. 1.0525 billion newly issued Comcast shares, valued
at $44.5 billion at Friday's closing price. Comcast would also assume $13.5
billion in AT&T debt, raising the value to $58 billion. AT&T
shareholders would end up with a majority of economic and voting interests in
the combined company, Comcast said.

Comcast also offered to buy AT&T Broadband's stakes in Time Warner
Entertainment, Cablevision Systems Corp. and Cablevision's Rainbow Media
Holdings Inc., proposing to assume more debt and issue more stock "to reflect
their value."

Comcast valued the proposal at 30 times either AT&T Broadband's 2000 cash
flow or 2001 annualized cash flow based on first-quarter results, "which, in
either case, far exceeds the trading multiple of any publicly traded broadband
company" and would be "a very substantial premium over published reports of the
estimated value of AT&T Broadband's business," Comcast said in a press

The offer also works out to roughly $4,300 per subscriber, including debt

Comcast scheduled a call-in press conference for 11:30 a.m. Monday to discuss
the audacious offer.

In a letter to AT&T Corp. chairman C. Michael Armstrong and AT&T's
board of directors, which Comcast released Sunday, Comcast president Brian Roberts
and chairman Ralph Roberts began: "Over many months of discussions, we have
shared a vision that AT&T Broadband and Comcast should be combined to create
the world's leader in broadband communications. We believed those discussions
were progressing toward a tax-free transaction that would dramatically
accelerate your own plan to separate the broadband company. It is unfortunate
that we were not able to agree on a basis for continuing our dialogue.
Accordingly, we submit this offer to you for consideration by your board before
a proxy statement relating to your broadband tracking-stock proposal is sent to
your shareholders later this month."

AT&T Broadband has 13.5 million cable subscribers. Comcast, the No. 3
U.S. MSO, has about 8.4 million.

In a May interview with Multichannel News, Roberts said Comcast was
not working with any other MSOs to collectively buy out AT&T Broadband, but
he would not comment otherwise on AT&T Broadband's future as an independent
company. Roberts and Armstrong took questions together after a panel discussion
at the National Show in May, and at that time, Armstrong said AT&T Broadband
was not for sale.

Comcast said its financial advisers were Morgan Stanley Dean Witter & Co., J.P. Morgan & Co., Merrill
Lynch & Co. and Quadrangle Group.

A Reuters story Sunday night reported that AT&T said it had no current plans to sell the broadband unit and that it would analyze Comcast's proposal in due course.