Companies Also to Swap Certain Cable Systems and Unwind Comcast's Interests in Time Warner Cable and Time Warner Entertainment Company
Transactions to Expand Both Companies' Cable Footprints and Enhance
Their Geographic Subscriber Clusters, Speeding the Delivery of New
Products in Areas Currently Served by Adelphia
Time Warner Inc. (NYSE:TWX) and Comcast Corporation (Nasdaq:CMCSA,
CMCSK) announced that they have reached definitive agreements to
acquire substantially all the assets of Adelphia Communications
Corporation (OTC: ADELQ) for a total of $12.7 billion in cash and 16%
of the common stock of Time Warner's cable subsidiary, Time Warner
Cable Inc. Time Warner Cable and Comcast also will swap certain cable
systems. In addition, Time Warner Cable will redeem Comcast's
interests of 17.9% in Time Warner Cable and 4.7% in Time Warner
Entertainment Company, L.P. (TWE) (together an effective 21% economic
ownership of Time Warner Cable) in an efficient and mutually
beneficial way.
These transactions will serve to expand both companies' cable
footprints and improve the geographic clusters of their subscribers.
Importantly, consumers in areas now served by Adelphia will benefit
significantly from the accelerated deployment of video, high-speed
data, voice and other advanced services.
As a result of these transactions, Time Warner Cable will gain
systems passing approximately 7.5 million homes, with approximately
3.5 million basic subscribers. Time Warner Cable will then manage a
total of approximately 14.4 million well-clustered basic subscribers.
Time Warner will own 84% of Time Warner Cable's common stock, and the
cable company will become a publicly traded company at the time of
closing.
Comcast will emerge from these transactions with approximately 1.8
million additional basic subscribers for a net cash investment of
approximately $1.5 billion. Following these transactions, Comcast will
serve a total of approximately 23.3 million customers. Comcast's
clusters in Washington, D.C., Florida, Massachusetts and Pennsylvania
will be enhanced, and Comcast will divest its interests in Time Warner
Cable and TWE in transactions designed to be tax-free to all parties.
Comcast's attributable subscribers, as calculated under the Federal
Communications Commission (FCC) rules, will remain under 30% of the
multi-channel video subscribers in the United States.
Time Warner Chairman and Chief Executive Officer Dick Parsons
said: "I'm very pleased that we're able to take full advantage of this
unique opportunity to grow our company at a fair price and move it
forward - strategically, operationally and financially. Consistent
with our strategy, these transactions will better position us to
compete, improve returns and create shareholder value. At Time Warner
Cable, we'll gain important scale, enhance our subscriber clusters and
accelerate growth. As we plan the smooth integration of these new
cable systems, we'll stay focused on meeting all of Time Warner's
financial and operational objectives, while evaluating how to best
employ our significant remaining capacity to improve shareholder
returns. My thanks to Brian Roberts and his Comcast team for being
such fine partners in this process that produced beneficial results
for both companies."
Brian L. Roberts, Chairman and Chief Executive Officer of Comcast,
said: "These transactions underscore our belief that there has never
been a better time to be in the cable business. Adding these
subscribers, many of whom are in high-growth, geographically desirable
areas, will allow us to roll out our new products and services
rapidly. Our vision remains to provide customers with more choice and
control of their entertainment and communication services, and to
generate superior shareholder returns. I would like to thank Dick
Parsons and everyone at Time Warner for helping to achieve such a
positive outcome for all parties."
Terms of Proposed Transactions
In the proposed transactions:
- Time Warner Cable and Comcast will each acquire a portion of
Adelphia's assets, representing approximately 5.0 million
basic cable subscribers in the aggregate. Time Warner Cable
will pay $9.2 billion in cash and will issue common shares
representing 16% of Time Warner Cable's outstanding common
equity (taking into account the redemption transaction with
Comcast) to Adelphia stakeholders in connection with its
acquisition agreement. Comcast will pay $3.5 billion in cash.
- Time Warner Cable and Comcast have agreed to swap certain
cable systems to enhance their respective geographic clusters
of subscribers.
- Time Warner Cable will redeem Comcast's 17.9% interest in Time
Warner Cable, now held in an FCC-mandated trust, in exchange
for a subsidiary holding Time Warner Cable systems serving
nearly 600,000 subscribers, as well as approximately $1.856
billion in cash.
- TWE will redeem Comcast's 4.7% interest in TWE, now held in an
FCC-mandated trust, in exchange for cable systems serving more
than 150,000 subscribers, as well as approximately $133
million in cash.
- Comcast's net cash investment in these transactions will be
$1.5 billion.
- The purchase of the Adelphia assets is not dependent on the
occurrence of the system swaps and redemption transactions
between Time Warner and Comcast.
Steve Burke, Chief Operating Officer of Comcast, said, "The
Adelphia transaction, the various system swaps, and the redemption of
our Time Warner Cable interests will allow us to enhance our key
clusters. It is truly a perfect fit. We look forward to quickly
integrating the 1.8 million additional subscribers just as we did when
we acquired AT&T Broadband and its 13 million subscribers in 2002.
Most importantly, we look forward to providing all our subscribers,
both old and new, with a complete suite of integrated communications
and entertainment products."
Don Logan, Chairman of Time Warner's Media & Communications Group,
said: "We like the cable business. It's the only platform today that
can deliver enhanced digital video, high-speed data and voice services
to consumers, and we have great confidence in its future. Our newly
acquired systems will give us a bigger and better-clustered cable
footprint, built around five large clusters, including New York City
and Los Angeles. Together with Glenn Britt and the Time Warner Cable
team, we'll bring our experience in innovation and proven operating
track record to improving and growing the performance of these new
systems."
Outcome for Time Warner
When these transactions close, Time Warner will own 84% of Time
Warner Cable's common stock, which will continue to consist of Class A
shares and Class B super-voting shares. The remaining 16% of Time
Warner Cable's common equity initially will be owned by Adelphia
stakeholders and is expected to be publicly traded in the form of
Class A shares. In addition to its 84% stake in the publicly traded
Time Warner Cable, Time Warner also will own a direct non-voting
common equity interest of approximately $2.9 billion in a subsidiary
of Time Warner Cable. The acquisition will be accounted for as an
asset purchase. Time Warner said that it expects to retain significant
financial flexibility, while maintaining its strong investment-grade
debt rating.
Taking into account the proposed acquisition, swaps and
redemptions, on a net basis, Time Warner Cable will gain approximately
3.5 million basic video subscribers. Specifically, Time Warner Cable
will add around 3 million Adelphia subscribers and more than 1 million
Comcast subscribers, and will give Comcast approximately 750,000
current Time Warner Cable subscribers. It will then manage a total of
approximately 14.4 million basic subscribers - 12.9 million
consolidated and 1.5 million in 50%-owned continuing joint ventures
with Comcast. That will make Time Warner Cable the second-largest
multi-channel video provider in the U.S. - ahead of all other cable
operators, except for Comcast, and ahead of both major satellite
companies.
Once these transactions are complete, 85% of Time Warner Cable's
managed subscribers will be located in five large clusters, including
(in round numbers): 3.1 million in New York, 2.6 million in Texas, 2.4
million in California, 2.3 million in Ohio and 1.9 million in the
Carolinas. Time Warner Cable will be the largest cable provider in
both New York City and Los Angeles, cities which anchor the country's
two largest designated market areas (DMAs).
As part of his current duties as Chairman of Time Warner's Media &
Communications Group, Mr. Logan will become non-executive Chairman of
Time Warner Cable's board of directors. Glenn Britt, who now serves as
Time Warner Cable's Chairman and Chief Executive Officer, will remain
Chief Executive Officer and also will be named President.
Mr. Britt said: "We're very excited about this opportunity and
look forward to taking over the day-to-day management of these new
systems. Over the last few months, we've done extensive due diligence
on the Adelphia properties and have a very realistic view of how we
can create new value. We expect a smooth integration, and we'll
quickly bring greater choice to consumers with our popular enhanced
digital video and high-speed data services. We also are well
positioned to compete effectively for telephone customers with our new
Digital Phone service. We have the technological, managerial and
operational expertise that will allow us to drive penetration rates
and improve performance."
Outcome for Comcast
Taking into account the proposed acquisition, swaps and
redemptions, on a net basis, Comcast will gain approximately 1.8
million basic video subscribers. Specifically, Comcast will add
approximately 2.1 million Adelphia subscribers through the acquisition
and the swap, and approximately 750,000 Time Warner cable subscribers
through the redemptions of Comcast's interest in Time Warner Cable and
TWE and the swap. Comcast will give Time Warner more than 1 million
subscribers. Comcast will serve approximately 23.3 million owned and
operated subscribers and be attributed with approximately 3.5 million
additional subscribers held in various partnerships. Comcast will
remain the largest multi-channel video provider in the U.S. and the
nation's largest high-speed Internet provider. As a result of these
transactions, Comcast will expand its presence in such key geographic
areas as Washington D.C., West Palm Beach, Boston and Pittsburgh.
Approvals and Advisors
These transactions between Time Warner Cable, Comcast and Adelphia
are subject to customary regulatory review and approvals, including
Hart-Scott-Rodino, FCC and local franchise approvals, as well as the
Adelphia bankruptcy process, which involves approvals by the
bankruptcy court having jurisdiction of Adelphia's Chapter 11 case and
Adelphia's creditors. Closing is expected in about 9 to 12 months.
Bear Stearns and Lehman Brothers acted as financial advisors to
Time Warner. The Blackstone Group acted as financial advisor to
Comcast on the Adelphia transaction and assisted on Time Warner.
Morgan Stanley acted as financial advisor to Comcast on the Time
Warner transaction and assisted on Adelphia. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is legal advisor to Time Warner. Davis Polk &
Wardwell is legal advisor to Comcast. Ballard Spahr Andrews &
Ingersoll, LLP advised Comcast on bankruptcy-related issues.
Subscriber Information
The subscriber information contained herein with regard to
reporting basic video subscribers has been approximated because each
company uses somewhat different methodologies with respect to
reporting subscriber counts of multiple-dwelling units. Time Warner
will provide additional information with respect to its subscriber
count methodology and the impact of these transactions in materials
furnished to the Securities and Exchange Commission and in a
conference call for investors scheduled for today (see details below).
About Time Warner Inc.
Time Warner Inc. is a leading media and entertainment company,
whose businesses include interactive services, cable systems, filmed
entertainment, television networks and publishing.
About Comcast Corporation
Comcast Corporation is the nation's leading provider of cable,
entertainment and communications products and services. With 21.5
million cable customers and 7 million high-speed Internet customers,
Comcast is principally involved in the development, management and
operation of broadband cable networks and in the delivery of
programming content.
Comcast's content networks and investments include E!
Entertainment Television, Style Network, The Golf Channel, Outdoor
Life Network, G4, AZN Television, TV One and four Comcast SportsNets.
The Company also has a majority ownership in Comcast-Spectacor, whose
major holdings include the Philadelphia Flyers NHL hockey team, the
Philadelphia 76ers NBA basketball team and two large multipurpose
arenas in Philadelphia.
About Time Warner Cable Inc.
Time Warner Cable owns or manages cable systems serving 10.9
million subscribers in 27 states, which include some of the most
technologically advanced, best-clustered cable systems in the country
with more than 75% of the Company's customers in systems of 300,000
subscribers or more. Utilizing a fully upgraded advanced cable network
and a steadfast commitment to providing consumers with choice, value
and world-class customer service, Time Warner Cable is an industry
leader in delivering advanced products and services such as video on
demand, high-definition television, digital video recorders,
high-speed data, wireless home networking and Digital Phone. Time
Warner Cable is a majority-owned subsidiary of Time Warner Inc.
Information on Conference Calls
Time Warner's management will discuss today's announcement on a
conference call for investors at 8:30 a.m. ET on Thursday, April 21,
2005. The dial-in numbers are: Domestic - (888) 566 1710 and
International - (773) 799 3956. The Passcode is "Time Warner
Investor."
Please dial in at least ten minutes before the call's scheduled
start time to ensure you are connected by the start of the meeting.
Slide presentations to accompany the conference call, as well as a
live audio webcast of the conference call, will be available online at
www.timewarner.com/investors. To listen to the live webcast, please go
to the Web site 15 minutes prior to the start of the presentation to
register, download and install any necessary software. Members of the
media are invited to listen to this conference call.
A Comcast conference call for investors and analysts will be held
at 9:30 a.m. ET on Thursday, April 21, 2005. Members of the media are
invited to listen to this conference call.
The conference call will be broadcast live via the Company's
Investor Relations Web site at www.cmcsa.com or www.cmcsk.com. A
recording of the call will be available on the Investor Relations Web
site starting at 1:30 p.m. ET on Thursday, April 21, 2005.
Those parties interested in participating via telephone should
dial (866) 206 2777. A telephone replay will begin immediately
following the call and will be available until Friday, April 22, 2005
at midnight ET. To access the rebroadcast, please dial (630) 652 3000
and enter Passcode number 11528460#.
Caution Concerning Forward-Looking Statements
This document includes certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on the current expectations and beliefs of
the management of Time Warner and Comcast, respectively, and are
subject to uncertainty and changes in circumstances.
Actual results may vary materially from those expressed or implied
by the statements herein due to the bankruptcy court approval process,
regulatory review and approval process and changes in economic,
business, competitive, technological and/or other regulatory factors,
as well as other factors affecting the operation of the businesses of
Time Warner Inc. and Comcast Corporation. More detailed information
about these factors may be found in the respective filings by Time
Warner and Comcast with the Securities and Exchange Commission,
including their most recent annual reports on Form 10-K. Time Warner
and Comcast are under no obligation to, and expressly disclaim any
such obligation to, update or alter the forward-looking statements,
whether as a result of new information, future events, or otherwise.
DISTRIBUTION OF PRINCIPAL PROPERTIES
To Time Warner
--------------
From Adelphia
New York (principally Buffalo)
California (principally Los Angeles)
Ohio (principally Cleveland)
Carolinas
Maine (Portland-Bangor)
From Comcast
Dallas
Los Angeles
Cleveland
To Comcast
----------
From Adelphia
Florida (principally Palm Beach and Miami)
Virginia (principally D.C. area)
New England (Boston area, Hartford area, Vermont)
Pennsylvania (principally Pittsburgh area,
Johnstown area and Scranton area)
Colorado Springs
From Time Warner
Minneapolis
Memphis
Jackson
Louisiana (principally Shreveport and Monroe)
Florida (principally Cape Coral and St. Augustine)
SOURCE: Time Warner Inc. and Comcast Corporation