March 22, 1999 9:55 AM PST

Comcast buys MediaOne in $60 billion deal

A merger between two major cable companies today will give birth to a new broadband powerhouse, executives from the two companies said.

Comcast, the fourth largest U.S. cable provider, agreed today to acquire MediaOne Group, the third biggest U.S. cable firm, in a $60 billion stock deal that would create a broadband communications firm.

"Our cable properties are geographically complementary and should provide the opportunity for meaningful revenue enhancement and operating synergies promptly after closing," said Comcast president Brian Roberts.

The new company will have a capitalization of almost $97 billion and will hold global telecommunications, programming, and Internet interests, said Comcast, the principal owner of electronic retailer QVC.

Philadelphia-based Comcast said in a statement today that each MediaOne shareholder would receive 1.1 shares of Comcast class A stock, or $80.16 a share based on Comcast's closing stock price Friday of $70.13.

The deal represents a 32 percent premium to Englewood, Colorado-based MediaOne's closing stock price Friday of $60.75.

The combined company will serve 11 million cable customers with systems that pass over 18 million homes domestically and generate more than $8 billion in 1998 revenues on a pro forma basis, and it will have little net debt.

Upon completion of the deal, MediaOne shareholders will own about 64 percent of the equity of the combined company.

The boards of both companies have unanimously approved the deal. Comcast chairman Ralph Roberts and Comcast president Brian Roberts will retain their positions in the combined firm. MediaOne chairman and chief executive Chuck Lillis will serve as vice chairman.

Analysts said the merger is one more deal in the quickly changing cable landscape.

"I'm not surprised with the merger in that the cable industry is consolidating," said Jeannette Noyes, an analyst with International Data Corporation. "MediaOne has been [looking for a buyer.] Comcast is a well run company. It recently sold off its wireless components and was looking to make some acquisitions. MediaOne has some good properties and I think this will probably be a good marriage."

The deal is expected to close by year-end. MediaOne has 45 days to accept a better proposal, subject to a payment of a $1.5 billion fee to Comcast, but it is prohibited from soliciting competing proposals.

"This transaction creates a company with a unique combination of high growth domestic and international broadband, programming, and telephony businesses," Lillis said in a statement.

The merger comes days after the closing of AT&T's $55 billion acquisition of cable television giant Tele-Communications Incorporated, which created a one-stop shop for phone service, Internet access, and cable television.

The merger agreement is subject to the approvals of MediaOne and Comcast shareholders as well as approvals from federal and local regulatory authorities.

Comcast enjoys investment money from Microsoft. The company sank $1 billion into the cable company last year to help roll out data and delivery services faster over cable.

Reuters contributed to this story.

 

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