<<St. Louis, Nov. 8 (Bloomberg) -- Charter Communications Inc., the cable-TV operator founded by billionaire Paul Allen, raised $3.23 billion in an initial stock sale, and is expected to begin trading tomorrow.
Charter, the nation's fourth-largest cable operator based on pending acquisitions, sold 170 million shares at $19 each, giving the company a market value of $3.23 billion. Goldman Sachs Group Inc., the investment bank that led the sale, initially set the expected price between $17 and $19.
Allen, the 46-year-old bachelor who co-founded Microsoft Corp. with Bill Gates, is turning to the public markets to pay down debt and finance part of the $13 billion in cable acquisitions Charter has announced this year. Investors are betting on Allen's vision of a future where cable lines will be the pipeline into homes and businesses for new communications services like interactive TV and high-speed Internet access.
``The perception by the public is that Paul Allen is smart money, and people are taking it as a sign of assurance that there's some serious upside to this deal,' said Ben Holmes, president of ipoPros.com, a Boulder, Colorado-based research firm that specializes in initial public offerings.
Allen, who said he'd also make a $750 million investment in the company along with the investors, will retain majority control through his Class B shares, which have more voting power than the Class A shares the company is putting on the market.
Cable
Like Charter, the nation's other big operators, such as AT&T Corp., Cablevision Systems Corp. and Cox Communications Inc., have been acquiring cable systems at a furious pace this year in an effort to build up large regional groupings of networks. They believe a strong regional presence is essential to marketing and delivering new services from digital cable to telephone service more efficiently.
Some analysts said the Charter offering could set the stage for new round of the kind of large acquisitions that have characterized the cable industry this year.
``Within 12 to 18 months, Charter could potentially make a run at a larger cable company including Adelphia or Comcast,' CIBC World Markets analyst Aryeh Bourkoff said,' referring to Comcast Corp. and Adelphia Communications Corp. ``But that's clearly predicated on an increase in Charter's market value.'
Charter will have 6.2 million customers when it completes the pending acquisitions, the registration statement said. Assuming these transactions had been completed last year, pro forma revenue for 1998 would have been $2.7 billion. Earnings before interest, taxes, depreciation and amortization -- a common measure of performance in the cable industry -- would have equaled $1.2 billion.
In the first quarter, adjusted for pending acquisitions, Charter had a loss of $192 million on revenue of $380 million, according to tables in its prospectus. For 1998, adjusted for pending purchases, the loss was $791 million on revenue of $1.4 billion, according to the tables.
Underwriters for the Charter IPO included<b. Goldman, Sachs & Co.; Bear, Stearns & Co.; and Morgan Stanley Dean Witter. Other underwriters are Donaldson, Lufkin & Jenrette; Merrill Lynch & Co.; Salomon Smith Barney; A.G. Edwards & Sons Inc.; and M.R. Beal & Co.
The shares will trade under the ticker CHTR on the Nasdaq stock exchange.
Nov/08/1999 19:08>> |
