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Comcast buying MediaOne
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March 22, 1999: 2:48 p.m. ET
$49B merger to form U.S. cable giant serving 11 million subscribers
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NEW YORK (CNNfn) - Comcast and MediaOne Group Monday announced the second-biggest merger in the red-hot cable industry, a $49 billion deal that will create one of the nation's largest cable TV operators.
Comcast, the No. 3 cable provider, and No. 4 MediaOne together would serve 11 million customers, rivaling Tele-Communications, a unit of AT&T, and Time Warner, the nation's biggest cable operator. AT&T's recently completed $55 billion purchase of Tele-Communications ranks as the biggest purchase of cable assets, according to Securities Data Co., which tracks mergers.
Cable industry attracting attention
Cable has caught on as buyers like AT&T bet that cable subscribers will want not just TV connections but high-speed Internet access via faster cable lines, and phone service - betting that started three years ago after regulators rewrote the rules to allow cable and telephone companies into each other's businesses.
While it's unclear if the new rules have boosted competition and driven down prices, industry experts say what is clear is that investors have been snapping up cable assets like there's no tomorrow.
"Cable is a big fat pipe and that's going to let some of these newer technologies come into the home faster," Marc Greenberg, portfolio manager at Avatar Associates, told CNNfn. "The concern right now is the line into the home for the Internet."
The attempt to build networks based on so-called broadband technology such as cable fueled the Comcast-MediaOne deal and has been a factor in the AT&T-Tele-Communications deal and other mergers.
In addition to AT&T, those buying cable systems in recent years include Microsoft co-founder Paul Allen and Microsoft itself, which paid $1 billion for a stake in Comcast in 1997.
Comcast President Brian Roberts said the deal would "leapfrog" the company near the top of the cable industry. "There is no other transaction that could have done this for our company," he said, noting the companies' cable systems and other assets fit well together. (263K WAV) or (263 AIFF).
Comcast focusing on cable business
Comcast, which also owns a controlling stake in the QVC home shopping channel, has focused on its cable business after selling its cellular phone unit to SBC Communications (SBC) in January.
MediaOne, seeking a partner since its spin-off from regional phone company U.S. West was completed, also owns a piece of Road Runner, the broadband Internet service whose other partners include Microsoft (MSFT), Compaq (CPQ) and Time Warner (TWX), which also owns CNN and CNNfn.
Under the deal, MediaOne (UMG) shareholders will receive 1.1 Comcast (CMCSK) Class A special common shares for each MediaOne share, valuing the deal at $48.6 billion based on Friday's closing prices.
MediaOne shares surged 5-11/16 to 66-7/16 while Comcast fell 7-1/2 to 65-3/8, making the stock portion of the deal worth about $43.6 billion. In addition, Comcast would assume $11 billion in debt, bringing the total value of the deal to $54.6 billion.
Comcast Chairman Ralph Roberts will be chairman of Comcast/MediaOne while Brian Roberts, Ralph's son, will be president. MediaOne Chairman Charles Lillis will be vice-chairman.
He said the idea for the deal came to him after a business meeting and he called MediaOne's Lillis and said, "We've gotta get married."
"One day he called and said let's sit down and talk" and the deal came together quickly, he said, adding it was approved by directors of MediaOne, based outside Denver, and Philadelphia-based Comcast late last night.
It remains subject to approval by regulators and shareholders. The companies expect to complete the merger by year-end.
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Comcast
MediaOne Group
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