The wait to determine the ultimate winner of Adelphia Communications Corp. continued last week, but some familiar with the situation said a final decision could be made soon.
As reported, according to sources, Time Warner Inc. and Comcast Corp. submitted their joint bid for Adelphia’s 5.2 million subscribers on April 7 to the U.S. Bankruptcy Court for the Southern District of New York.
Judge Robert Gerber was expected to take seven to 10 days to decide whether to accept or deny the $17.6 billion to $18 billion acquisition plan.
With no decision as of press time last Friday, that could mean that Gerber could make his decision by April 21, although some people familiar with the situation said the complexity of the Time Warner-Comcast offer could extend that deadline. Officials at the court had no comment.
Cablevision Systems Corp. reportedly lobbed in a $16.5 billion all-cash bid around April 5 and was expected to decide whether to sweeten that offer late last week. But as of press time, Cablevision had given no indication it would do so.
THUMBS ARE UP
Adelphia’s management and its creditors have already given their thumbs up to the Time Warner-Comcast plan, which consists of $12.5 billion in cash and the rest in Time Warner Cable stock. Time Warner would construct the transaction as a “reverse merger,” or reverse initial public offering, with assets from the acquiring company folding into the acquired company’s (Adelphia’s) publicly traded structure.
In a research report, Merrill Lynch & Co. media analysts Jessica Reif Cohen estimated the reverse IPO would give Time Warner an 84% equity interest in the combined cable company, with the rest going to creditors and the public. The $12.5 billion in cash would go towards retiring Adelphia’s $8.2 billion debtor-in-possession financing, which Reif Cohen assumed would be refinanced and rolled into the new entity.
Comcast — which is contributing about $2 billion in cash and a 21% interest in Time Warner Cable — would receive about 2 million cable subscribers in return.
Sources familiar with the auction process said that the cable systems swaps will involve a mixture of Adelphia, Time Warner Cable and Comcast properties and will be conducted in several separate transactions, mainly for tax reasons.
“There will be multiple transactions, all unrelated to each other to make sure that all the tax arguments are as strong as they can be made,” one source familiar with the process said. “It makes for a very complicated transaction because of that.”
Time Warner, Comcast and Adelphia officials declined to comment.
Comcast is expected to receive former Adelphia customers in Pennsylvania (500,000 subscribers) and New England (600,000 subscribers).
In addition to Los Angeles, Time Warner would appear to be most interested in Adelphia’s Ohio cluster (with 600,000 customers including those in Cleveland and Greater Cincinnati); and Western New York and Connecticut (650,000 subscribers, including Buffalo).
Less clear is which operator will end up with the Florida and Southeast (600,000 subscribers) cluster, where both Time Warner and Comcast have a substantial presence.
Adelphia’s Virginia/Maryland/Colorado Springs/Kentucky cluster, with about 1 million subscribers, could be parsed out to Comcast (especially systems in Baltimore/Washington D.C. and Colorado Springs) with the rest split up and sold off to other companies in the future.
TOO SOON TO TALK
While integration of the Adelphia systems is likely at the top of both Comcast’s and Time Warner’s agendas if they do ultimately win the Adelphia assets, both companies declined to comment.
“It’s just too soon for that,” Comcast spokesman Tim Fitzpatrick said of any integration issues regarding Adelphia. “Once we get some sort of a definitive sense of which way things are going to go and how they are going to go, we will probably be able to talk more about that.”
Cablevision was said to be considering changes to its $16.5 billion offer. But people in the Time Warner-Comcast camp remained confident that their bid would prevail.
At the National Show earlier this month, Time Warner Entertainment & Networks Group chairman Jeff Bewkes said he didn’t believe a Cablevision bid for Adelphia warranted a counteroffer. “I don’t think that bid is that attractive to them [Adelphia],” Bewkes said at the National Show April 5.
Said Fulcrum Global Partners media analyst Richard Greenfield: “I still think they [Cablevision] have essentially no chance of winning, given the fact that it would be very hard to get comfortable doing a deal with the Dolans given what’s happened over the last couple of years in numerous of their contract negotiations, etc. I can’t imagine anyone wanting to try to deal with them in a transaction that won’t close for a year.”
Cablevision declined comment.