Glenn Jones decided to hand over control of Jones
Intercable Inc. to Comcast Corp. sooner, rather than later, cashing in for $200 million.
That sum, for his 2.9 million shares of special common
stock, works out to about $69 per share, versus the $27 or so that minority shareholders
get for their Jones Intercable shares. It stems from a deal that Jones cut with Bell
Canada International in 1994, and the chairman was unapologetic about his premium.
"It's America," he told reporters on a
conference call, adding that the terms were laid out long ago, and that they are unlikely
to be challenged by shareholders now. Jones said he will hang on to more than 2 million
class A shares that he also owns.
When the deal closes, in about six months, Comcast will add
some 1 million Jones Intercable subscribers to its own 4.5 million domestic cable
customers. Comcast is buying 12.8 million Jones Intercable class A shares from BCI Telecom
Holdings Inc. (BTH), along with the Jones Intercable control shares, making the total
price about $700 million for 37 percent equity and 47 percent voting control.
Philadelphia-based Comcast will probably shed most of Jones
Intercable's 260 headquarters employees in Englewood, Colo., although Comcast
hasn't commented on that, other than to tell analysts during a conference call about
its quarterly earnings that it expects to achieve the kinds of cost reductions that are
typical in acquisitions.
Jones Intercable president Jim O'Brien said it was
premature to say how many Jones Intercable staffers wouldn't make it over to Comcast.
But he added that there would clearly be a "grieving" process ahead.
"It's sad," he said. "It's been fun."
Jones Intercable has about 3,500 employees, mostly in the
cable systems. The system employees' jobs probably won't be affected, Jones
Intercable executives said.
Comcast also hasn't said whether it plans to buy --
either with stock or cash -- the 22.2 million class A shares and 1.2 million special
common shares held by the public. Analysts said Comcast president Brian Roberts told them
that the control buyout will allow Comcast to accomplish its strategic objective.
But several analysts said Comcast could well afford to buy
out the public, at a premium, and it will probably do so after the deal with Glenn Jones
closes.
Janco Partners analyst Ted Henderson said he thinks that
Comcast will offer Jones Intercable shareholders Comcast stock for their shares, probably
at a ratio that works out to about $35 to $40 per share for class A stock. Comcast will
probably opt to buy out the public, rather than having the hassle of maintaining separate
books for Jones Intercable, Henderson and other analysts said.
"I don't think that you can maximize efficiencies
by having a separate set of books," Salomon Smith Barney Inc. cable analyst Spencer
Grimes said. "Then, there's the question: Will they ever see full value of the
former Jones properties if they're not fully owned?"
Comcast officials did not return calls late last week.
Glenn Jones said the outcome was "propitious ... in
terms of shareholder value." After effectively rolling up all of the limited
partnerships that built the Jones cable systems, efforts to expand the company or to
introduce new services were inhibited by the arrangement with BTH, which bought veto power
over some corporate moves, the chairman said.
The best-known dispute was BTH's opposition to the
introduction of the Jones Internet Channel high-speed-data service on Jones Intercable
systems. Jones rolled out the service anyway, but BTH sued and won a restraining order.
Jones could have stayed at the helm of the cable operations
until December 2001, when BTH, on Comcast's behalf, could exercise an option to buy
the control shares. He said he chose to accelerate the turnover because there was an
economic benefit to getting paid now, rather than later.
Jones said his employment contract -- which paid him about
$3 million last year in salary, bonus and options -- will "go away," but he did
not say if that involved a monetary settlement.
Jones also figures that Comcast will extend carriage of the
Jones-controlled Great American Country and Knowledge TV networks, partly because Comcast
will end up owning around 30 percent of those networks.
Jones said he wanted to make sure that the deal went
through and that Comcast ended up in control. Comcast knows the cable business, it likes
it, and it is likely to do the things that are needed to boost shareholder value, he
added.
Comcast had wanted to accelerate the acquisition ever since
it was announced in late May. The question was whether Jones would agree. In May, Comcast
executives said privately that they wanted to wrap up the deal quickly, partly to prevent
a brain drain of key system-level managers at Jones Intercable.
