Top Two Can Bid for Adelphia

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The auction for Adelphia Communications Corp. began to heat up last week after the Denver-based MSO said it would allow two of its largest potential bidders to make a joint offer for all or part of the company.

Adelphia had mulled whether to block a joint bid by Time Warner Inc. and Comcast Corp. at a regularly scheduled meeting earlier in October. While no decision was made then, Adelphia apparently felt that it was better to have a joint offer from the two largest MSOs in the country than no bid at all.

Adelphia spokesman Paul Jacobson said both Time Warner and Comcast signed confidentiality agreements with the MSO, allowing them to make a joint bid for all or part of the systems.

He declined to elaborate, saying that Adelphia is committed “to running a fair and orderly process aimed at maximizing the value for all bankruptcy constituents.”

In a conference call with analysts to discuss its third-quarter results last week, Comcast chairman and CEO Brian Roberts said little about the Adelphia auction.

“We're taking a look,” Roberts said about the Adelphia assets.

Time Warner has long been thought to be the most logical buyer for Adelphia, and could launch a bid by merging its cable assets into Adelphia, which is already publicly traded.

Time Warner had proposed an initial public offering of its cable assets last year, but scrapped that plan after announcing a Securities and Exchange Commission investigation into accounting practices at its America Online Internet-service provider unit.

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

A Time Warner Cable reverse merger would also solve several other problems for the No. 2 U.S. MSO. Comcast, which received a 21% interest in Time Warner Cable as part of the unwinding of the Time Warner Entertainment L.P. partnership, could receive Adelphia cable systems as payment for that interest.

Adelphia put itself up for sale in August, amid intense pressure from bondholders and creditors' groups. The Denver-based MSO had originally planned to emerge from Chapter 11 bankruptcy as a whole company.

In September, Adelphia said it would offer its systems in seven separate clusters, ranging in size from 500,000 subscribers to 1.5 million subscribers. In all, about 5.2 million Adelphia customers are on the block.

So far, more than 50 interested parties have signed confidentiality agreements with Adelphia. Those agreements are crucial to potential bidders — without them, they can't look at Adelphia's financial documents or participate in the auction.

It's expected Adelphia could attract $17 billion to $20 billion at auction.

Adelphia anticipates that preliminary bids will come in by the end of October. Final bids are expected to be made in December, with a decision as to the winners expected in early 2005.

While Time Warner and Comcast are coming late to the game, sources familiar with the auction process said it is likely those deadlines will be extended to allow for ample time to make a bid.

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