Comcast Corp. completed its $700 million purchase of a
controlling stake in Jones Intercable Inc. last week, adding 1 million new customers to
its 4.5 million-subscriber base in the process.
The Philadelphia-based MSO paid $200 million for 2.9
million shares of special common stock held by Jones Intercable founder Glenn Jones --
shares amounting to 57 percent of the outstanding issue and electing 75 percent of the
board of directors.
It shelled out another $500 million for 12.8 million class
A common shares owned by BCI Telecom Holdings Inc., the largest outside investor in Jones
Intercable.
As a result, Comcast now holds 37 percent of the equity and
47 percent of the voting interest in the company. Comcast said Jones Intercable would
become a consolidated but publicly owned subsidiary of Comcast.
Meanwhile, last Wednesday was the last day for most of the
fewer than 100 employees left at Jones Intercable's Englewood, Colo., corporate
headquarters, including the MSO's top executives.
"Clearly, there are mixed feelings," departing
president Jim O'Brien said. "I haven't heard a lot of gnashing of teeth -- at least
not yet. People hate to see the company go. But we've worked hard, we've had a lot of fun
and we are going out on a high note."
With Jones Intercable in the fold, Comcast now turns its
attention to its acquisition of Englewood-based MediaOne Group Inc., which it's purchasing
for $60 billion in stock and debt.
Sources indicated that the completion of the Jones
Intercable deal, which had been expected to close in March, was held up until last week by
two Maryland local franchising authorities that were balking at transferring their cable
systems to Comcast.
"But that wasn't going to stop the deal from going
through," a Jones Intercable insider said.
Comcast officials said one of the LFAs voted last week to
authorize a transfer, while the second, which represented fewer than 10,000 subscribers,
could sign off on a new deal shortly.
Meanwhile, Comcast officials said no decision had been made
on whether the company will buy back 22.2 million Jones Intercable class A common shares
and 1.2 million special common shares that are still in public hands.
"We just wanted to get the deal closed," said
John Alchin, Comcast's senior vice president and treasurer. "Now that we have control
of the company, for the time being, anyway, we'll leave Jones as a separate public
company. No decision has been made beyond that."
Some analysts, however, don't expect the current structure
to remain in place for long.
In a report issued after the deal closed, Janco Partners
analyst Ted Henderson repeated his prediction that Comcast will take out the remaining
Jones Intercable shareholders by year's end.
"We feel that the longer Comcast waits, the higher the
takeout prices of Jones go," Henderson wrote, noting that Jones Intercable's
continued strong financial performance would drive up the price on any transaction based
on cash-flow multiples.
Henderson estimated that it would take 22 million new
shares to acquire the outstanding interest in Jones Intercable. At current prices, that
would amount to 0.85 shares of Comcast stock for each share of Jones Intercable, he added.
Meanwhile, the mood among Jones Intercable employees ranged
from nostalgic to fatalistic.
O'Brien, who had just returned from a family cruise through
the Panama Canal, conceded that his immediate future might be limited to "another
cruise."
"I haven't a clue," O'Brien said, when asked
about his plans. "I know that I want to stay in the cable business, I want to have
fun and I don't want to work real hard."
Other departing Jones employees weren't in any rush to find
new jobs.
"I'm going to spend some time with my kids and take my
time looking for another position," a secretary to an outgoing executive said.
"It shouldn't be too difficult. I'm a secretary, for crying out loud. We're in
demand."
