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Cox Eyes Adelphia

Cox Communications Inc. executives have been carefully evaluating how they could acquire all or major parts of Adelphia Communications Corp., worth at least $17 billion, according to UBS Warburg LLC analyst Aryeh Bourkoff. Adelphia serves about 5 million subscribers around the country.

Robbins is hungry to bulk up his MSO’s portfolio, particularly with distressed properties that Cox could parlay into significant value. Cox’s study is strictly internal. Although investment bankers have streamed to Atlanta seeking an assignment to chase Adelphia, no one has been hired. Still, Robbins and his team have reached one firm conclusion: No moves until Adelphia emerges from Chapter 11.
An adviser to the company says Cox has decided that bankruptcy court is too contentious and complicated. It requires the courting of too many angry players including banks, senior bondholders, junk bondholders, various equity investors, many with conflicting agendas.
But adding Adelphia’s subscribers to Cox’s 6 million customers would make Cox the second-largest cable operator, behind Comcast, and if you count DBS operator DirecTV, the third-largest multichannel video distributor.
Cox would make a big stab at consolidating the Los Angeles market, combining Adelphia’s extensive system with its own Orange County operations. Plus, Cox would get substantial clusters in Miami; Cleveland; West Palm Beach, Fla.; and Vermont.
But Adelphia also has plenty of systems in less attractive rural markets. The Atlanta-based cable giant wouldn’t comment. A spokeswoman would say only that the company is open to opportunities fit is acquisition strategy.
Such a deal, however, presents complications for Cox. Adelphia is so large that buying the whole company in a stock swap would dramatically dilute Cox’s existing shareholders, notably Cox family holding company Cox Enterprises. And Adelphia’s current managers—led by ex-AT&T and ex-Continental Cablevision executives Bill Schleyer and Ron Cooper—don’t want to sell right away. They believe creditors will make out best if Adelphia reorganizes, shrinks its $21 billion debt load to $8.8 billion, and runs operations for a while. Of course, rival bids could emerge from Comcast and Time Warner Cable, which also want scarce clusters.
Robbins takes the long view. He seeks growth and was in the hunt with Comcast for AT&T Broadband until the price got too high. Lately, he has been preaching that size is overrated. But expect Robbins to build his empire rather than favor the status quo. “He thinks bringing management to troubled properties is a great way to make money,” says one Wall Street executive who has discussed an Adelphia deal with Robbins. “Jim definitely wants this.”