April 9, 2005 in Business

Cable giants reach deal to purchase Adelphia

Associated Press

NEW YORK — Time Warner Inc. and Comcast Corp. have reached an agreement in principle to buy the cable TV company Adelphia Communications Corp. for nearly $18 billion, according to newspaper reports Friday.

The tentative deal must still be approved in bankruptcy court, and a final resolution could be weeks away. Adelphia has been operating under bankruptcy protection since 2002 following an accounting fraud and corporate looting scandal by the Rigas family, which used to run the company.

If it goes through, the deal would also mark the first significant expansion for Time Warner since its disastrous 2000 merger with America Online. In the years since then, Time Warner has been shedding assets including its music company to shore up its balance sheet.

The deal would allow Comcast and Time Warner to restructure their cable holdings in ways they hope will please investors. As part of the reported deal, Comcast would be able to dispose of a 21 percent stake in Time Warner Cable, and Time Warner would seek to spin off of its own cable holdings, giving it a separately traded stock it could use to make other cable acquisitions.

Cable TV has been one of the growth areas within Time Warner’s stable of media companies in recent years, as customers sign up for premium services like high-speed Internet access, digital cable and telephone service carried over the Internet.

The Wall Street Journal reported in Friday editions that Time Warner and Comcast would put up $12 billion in cash and about $5.6 billion in stock, while The New York Times put the figures at $13.5 billion in cash and about $4.5 billion in stock.

Spokeswomen for Adelphia, Time Warner and Comcast all declined to comment.

The deal could also face a potential challenge from an 11th-hour bid from Cablevision Systems Corp., a smaller New York-area cable provider that offered $16.5 billion in cash for Adelphia, according to several news reports. Cablevision has declined to comment on those reports.

Time Warner’s shares rose 35 cents to $18.23 in morning trading on the New York Stock Exchange, while Comcast’s A shares were up 24 cents at $33.52, also on the NYSE.

The companies met with a bankruptcy court judge Thursday to discuss procedures for completing a purchase, and a final deal could be days away, the newspapers reported.

As part of the deal, Philadelphia-based Comcast would contribute $2 billion and swap its stake in Time Warner in exchange for 2 million of Adelphia’s more than 5 million subscribers.

Adelphia, the nation’s fifth-largest cable television provider, filed for bankruptcy after founder John W. Rigas and others were accused of looting the company and cheating investors out of billions of dollars. Rigas and his son Timothy were convicted of conspiracy, bank fraud and securities fraud.

The company, which moved to the Denver suburb of Greenwood Village from Coudersport, Pa., closed bidding on its assets in late January.

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