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Closing In On Adelphia

Despite a surprise bid by Cablevision Systems Corp. at the last minute, cable giants Time Warner Cable and Comcast Corp. are moving closer to winning the auction for Adelphia Communications Corp.

On Friday, the operators were finalizing an agreement to buy Adelphia’s cable systems for $18  billion. Adelphia creditors would get $13 billion in cash, and stock it pegs as worth $5 billion.
That’s $400 million more than Time Warner’s initial bid.

The stock would be that of a new company combining Adelphia systems with Time Warner Cable.

Comcast, which currently owns 21% of Time Warner Cable, would exit, taking systems serving around 2 million with it.

Adelphia’s creditors could elect to sell their stock or bet that it will rise.

Cablevision surprised Wall Street this week by submitting a $16.5 billion all-cash bid.

That’s more than $1 billion less, but it presumes that Adelphia’s creditors would prefer cash to Time Warner Cable stock that might not turn out to be worth as much as purported.

The bid runs counter to Cablevision's strategy of concentrating in the metro New York market since selling all of its other systems in the late 1990s, but would serve Time Warner's goal of beefing up.

Though the company ostensibly counts 11 million subs, many are owned by partners. Time Warner actually owns systems serving seven million subscribers. Adelphia would boost that to 12 million.
Because it’s not clear what systems Comcast wants, it’s also not clear what new markets Time Warner Cable will enter. But Adelphia’s most lucrative properties are in Los Angeles and South Florida.

Because Adelphia filed for Chapter 11, the companies face a number of layers to get the deal closed, including final approval by all creditors' committees and a judge.

Since nothing happens quickly in Bankruptcy Court, it will take several months to complete the deal.