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Disney in AT&T Broadband bid?
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July 25, 2001: 2:56 p.m. ET
House of Mickey may lead bid for AT&T Broadband unit; Iger, Armstrong to fish
By Staff Writer Luisa Beltran
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NEW YORK (CNNfn) - Walt Disney Co. emerged Wednesday as a likely candidate to make a bid for AT&T or lead a group of companies to buy the cable business.
Walt Disney President and COO Robert Iger has been approached by some companies to help or join a bid for AT&T. Now Iger and AT&T Chairman C. Michael Armstrong are set to leave on a fishing trip where they may discuss Disney's interest, Armstrong said on a conference call Tuesday.
When asked Tuesday about Disney possibly leading a bid for the cable unit, Armstrong coyly deflected the question.
"Maybe when we go salmon fishing we'll know more about that," Armstrong said on the call. "They're one of our business customers; it's a big business."
Armstrong added that AT&T board has directed management to explore strategic and financial opportunities. "We want to take the time to thoughtfully do that," he said.
Walt Disney President and COO Robert Iger has been approached by several entities, a spokeswoman confirmed Wednesday. "We're reviewing their proposals," she said.
The Disney spokeswoman declined further comment. AT&T could not be reached for comment.
AOL also in talks
AT&T Corp. is also in preliminary talks with AOL Time Warner Inc. about a friendly deal to merge the two companies' cable systems, according to a published report Wednesday.
The Wall Street Journal, citing people familiar with the matter, said the talks between the nation's two largest cable companies started shortly after Comcast Corp. made an unsolicited $45 billion bid for AT&T's cable business, known as AT&T Broadband, on July 8.
Last week, AT&T rejected the Comcast offer because it did not reflect the "full value" of the cable assets.
Shares of AT&T (T: down $0.08 to $20.07, Research, Estimates) surged nearly 3 percent Wednesday, while shares of Comcast (CMCSA: up $0.48 to $36.05, Research, Estimates) gained more than two percent. Disney (DIS: up $0.07 to $26.54, Research, Estimates) and AOL (AOL: down $0.53 to $43.22, Research, Estimates) gained marginally.
AOL Time Warner is the parent company of CNN and CNNfn.
Both AOL Time Warner and AT&T declined comment on the Journal report.
AT&T has received several overtures from interested parties and the phone company is taking some of them "very seriously," a source familiar with the situation told CNNfn.com Wednesday. The discussions with the parties are still informal, the source said.
In addition to AOL and Disney, AT&T has held preliminary discussions with Cox Communications, Charter Communications, which is controlled by Paul Allen, co-founder of Microsoft Corp. (MSFT: Research, Estimates), have long been mentioned.
Cox declined to comment while Charter Communications could not be reached for comment.
Regulatory problems
A combination of AOL and ATT's cable systems would likely encounter regulatory hurdles and AOL may need to shed its programming unit, the source said.
"A merger wouldn't go clean as two wholes that stay together," the source said. "It would have to be structured differently."
Even before AT&T rejected the Comcast offer, the nation's top phone company was committed to splitting its broadband business from its consumer long-distance, business communications, and wireless businesses. However, the AT&T board left the door open to other discussions for its broadband business when it rejected the Comcast offer.
AT&T's rejection was largely anticipated and Comcast is now expected to sweeten its $45 billion offer. However, Philadelphia-based Comcast, the No. 3 U.S. cable operator, has no reason to boost its offer until AT&T receives a formal proposal, a Comcast source familiar with the negotiations said.
Outside of the very public letters exchanged by the companies, Comcast and AT&T have not communicated since AT&T discarded its bid on July 18.
"If AOL's offer turned into something different, something concrete, we would have to evaluate that differently," the source said. "There is no reason to sweeten the offer until a bid is in. We're gonna stick to our guns."
Comcast declined to comment.
The Journal said that one scenario being discussed would be for AT&T to spin off its broadband unit, the nation's largest cable operations, and to simultaneously merge it with AOL's cable business.
In order for the transaction to be tax-free, AT&T shareholders need to hold at least half of the combined company, but AOL would have between 40 percent and 49 percent and could have effective control of the combined operation, the report said.
AT&T's board objected to the Comcast offer partly because Comcast would control 45 percent of the voting power of a combined Comcast-AT&T cable operation, even though Comcast shareholders would own a much smaller percentage of shares. The Journal report said AOL and AT&T are discussing AOL owning 45 percent of the shares and controlling 45 percent of votes.
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The paper said the talks have been between Richard Parsons, AOL's co-chief operating officer, and AT&T CEO Armstrong. It said that Gerald Levin, AOL's CEO, also has participated.
The other bids for AT&T Broadband were widely expected, said analyst Pat Comack of Guzman & Co.
"People are scrambling to do the math and see whether a bid is workable," he said. "AT&T delayed the tracking stock to allow other interested parties to make a bid and do right thing for shareholders."
AT&T displayed better margins for the broadband unit which will make it harder for Comcast to make its unsolicited bid, Guzman said. 
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