Comcast Corp. and Time Warner Inc. are planning a joint bid for Adelphia Communications Corp. as part of a deal that could lead to a broad realignment of interests in the cable industry and increase Comcast's already dominant presence in the mid-Atlantic region.
A purchase could help Comcast and Time Warner disentangle their own overlapping interests, spokesmen for the two companies said. Comcast is a major stakeholder in Time Warner Cable, and the two rivals have long been interested in going their separate ways.
Under one scenario, the two companies would jointly buy Adelphia's franchises and then Comcast would take control of a majority of the acquired properties in return for giving up its stake in Time Warner Cable.
For a deal to happen, the two companies would first have to persuade Adelphia to entertain an offer for the whole company. Adelphia, which filed for bankruptcy in 2002, announced last week that it planned to break up the company and auction off service in seven geographic clusters.
The entire cable industry has undergone a massive wave of consolidation in the past decade. Survivors such as Time Warner and Comcast have used their larger footprint to launch new services, including high-speed Internet service, digital cable packages that include hundreds of channels, and telephone service. More recently, the cable industry has faced renewed competition from telephone companies, which are trying to provide many of the same services over telephone lines.
Adelphia serves 140,000 customers in Washington's outer suburbs, including Loudoun, Stafford, Carroll and Frederick counties. Comcast is the nation's largest cable company, with 21 million subscribers; Time Warner is the second-largest cable provider, with approximately 12 million customers.
The two companies have been trying to disentangle from each other since Comcast inherited its stake in Time Warner through its takeover of AT&T Corp.'s cable division in 2001. Last year, Comcast agreed to give up its interest in all of Time Warner's non-cable system properties, including HBO and other programming channels, for $1.5 billion in stock and $2.1 billion in cash.
Adelphia's cable systems, which serve approximately 5 million homes, could be worth as much as $18 billion, according to Matthew J. Harrigan, a cable industry analyst for Colorado-based Janco Partners.
The complex transaction appears to be an effort by both companies to avoid a big tax bill, Harrigan said. A Comcast spokesman declined to comment on any specific elements of the potential bid. "We have long said that we wanted to exit our 21 percent stake in Time Warner and we would like to do it in as tax-efficient a manner as possible," said Timothy Fitzpatrick, the spokesman.
Under a separate deal announced yesterday, Comcast would reduce its 21 percent stake in Time Warner to 17 percent by accepting $750 million in cash and stock in a subsidiary that runs cable systems serving 90,000 cable customers.
Shares of both Time Warner and Comcast fell about 1 percent yesterday. Comcast's stock closed at $27.87, down 27 cents. Time Warner shares fell 17 cents, to close at $16.33.