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Cable TV giants cut deal to buy Adelphia

Newspaper reports say Time Warner Inc. and Comcast Corp. have agreed on a complex $18-billion purchase plan.

Associated Press
Published April 9, 2005

NEW YORK - Time Warner Inc. and Comcast Corp. have reached an agreement in principle to buy the cable TV company Adelphia Communications Corp. for nearly $18-billion, according to newspaper reports Friday.

The tentative deal must be approved in bankruptcy court, and a final resolution could be weeks away.

Adelphia has been operating under bankruptcy protection since 2002 after an accounting fraud and corporate looting scandal by the Rigas family, which used to run the company.

If it goes through, the deal would mark the first significant expansion for Time Warner since its disastrous 2000 merger with America Online. The deal would allow Comcast and Time Warner to restructure their cable holdings in ways they hope will please investors. As part of the reported deal, Comcast would be able to dispose of a 21 percent stake in Time Warner Cable, and Time Warner would seek to spin off of its own cable holdings, giving it a separately traded stock it could use to make other cable acquisitions.

Cable TV has been one of the growth areas within Time Warner's stable of media companies in recent years, as customers sign up for premium services like high-speed Internet access, digital cable and telephone service carried over the Internet.

The Wall Street Journal reported that Time Warner and Comcast would put up $12-billion in cash and about $5.6-billion in stock, while the New York Times put the figures at $13.5-billion in cash and about $4.5-billion in stock.

Spokeswomen for Adelphia, Time Warner and Comcast declined to comment.

The deal could also face a challenge from an 11th-hour bid from Cablevision Systems Corp., a smaller New York-area cable provider that offered $16.5-billion in cash for Adelphia, according to several news reports. Cablevision has declined to comment.

As part of the deal, Comcast would contribute $2-billion and swap its stake in Time Warner in exchange for 2-million of Adelphia's more than 5-million subscribers.

The companies met with a bankruptcy court judge Thursday to discuss procedures for completing a purchase and a final deal could be days away, the newspapers reported.

Adelphia, the nation's fifth-largest cable television provider, filed for bankruptcy after founder John Rigas and others were accused of looting the company and cheating investors out of billions of dollars.

Rigas and his son Timothy were convicted of conspiracy, bank fraud and securities fraud.

[Last modified April 9, 2005, 07:10:29]

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