After five months of sometimes contentious negotiations, Comcast Corp. emerged as the winner of AT&T Broadband, beating out offers from two other media giants with a bid valued at $72 billion.
AT&T Corp. will simultaneously spin off its AT&T Broadband unit and merge it with
Comcast, forming a new entity called AT&T Comcast Corp.
The combined company would have more than 22 million subscribers in 41 states
and easily be the largest MSO in the country.
According to AT&T, the Comcast bid values AT&T's cable systems at
about $4,500 per subscriber -- about $400 per subscriber more than AT&T
originally paid for the assets.
AT&T chairman C. Michael Armstrong will serve as chairman of the new
entity, with Comcast president Brian Roberts serving as CEO.
Speaking on CNBC Wednesday night, Roberts praised Armstrong, who apparently
persuaded AT&T's directors that Comcast's bid was better than options
offered by either Cox Communications Inc. or AOL Time Warner Inc.
AT&T directors also considered spinning out AT&T Broadband as an
independent company.
"I think from the beginning, we both shared a vision that this combined
company could be fantastic. And we've managed to work everything out," Roberts
said. "And again, that takes a lot of courage and leadership on Mike's part, and
we're pretty excited tonight."
While Comcast made much of its higher cash-flow margins than AT&T's,
Roberts also said AT&T had gone a long way to improve its margins, and it will
bring telephony expertise to Comcast, in addition to millions of subscribers.
Armstrong and Roberts will form a transition team -- consisting of Comcast
Cable Communications Inc. president Steven Burke, AT&T chief financial officer Charles H. Noski, AT&T Broadband
president William Schleyer and Comcast executive vice president Lawrence Smith --
to address issues arising from the merger.
AT&T shareholders will receive 0.34 shares of AT&T Comcast for every
share they own. Comcast shareholders will receive one share of the new entity
for each share of Comcast.
The new company will include the cable properties of both companies, as well
as their programming assets, including AT&T's 25.5 percent interest in Time
Warner Entertainment and Comcast cable channels QVC, E! Entertainment Television and
The Golf Channel.
AT&T Comcast will also assume about $20 million in AT&T debt.
Microsoft Corp., which holds about $5 billion in AT&T preferred stock,
agreed to convert those shares into 115 million shares of the new AT&T
Comcast.
When the deal closes -- expected by mid-2002 -- AT&T shareholders will have
a 56 percent economic interest and 66 percent voting control of the new
company.
The Roberts family, which had majority voting control over Comcast, will have
a one-third voting interest in the new entity.
Comcast put AT&T Broadband in play in July with a $54 billion unsolicited
offer, which was rejected by AT&T's board as inadequate.
The bid sparked a full-scale auction for the AT&T Broadband unit, attracting bids
from media giants like AOL Time Warner and Cox.
