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news.com
In a letter to MediaOne Group's chief executive Charles
Lillis, C. Michael Armstrong calls his firm's surprise
counter offer for the cable operator "superior" when
compared to Comcast's earlier multibillion-dollar bid.
April 22, 1999
Mr. Charles M. Lillis, Chairman and Chief Executive Officer
MediaOne Group, Inc.
188 Inverness Drive West
Englewood, Colorado 80112
Dear Chuck:
AT&T is pleased to offer to acquire all of MediaOne Group for
cash and AT&T common stock. AT&T will pay $30.85 in cash,
subject to upward adjustment, and 0.95 of a share of AT&T
common stock, for each share of MediaOne common stock.
Based on today's closing price, our cash and stock offer has a
value of $87.375 per MediaOne share.
AT&T will support the value of this offer by increasing the
amount of cash per share to offset up to a 10 percent decline
in AT&T's stock price from yesterday's closing price of $57 per
share. With this feature, we provide downside protection for the
value of our proposal, while MediaOne shareholders will realize
all the upside of any increases in AT&T's stock price.
The stock portion of our offer will be tax-free to MediaOne
shareholders. If you wish, we would also be happy to discuss
with you a structure that would give MediaOne shareholders
the ability to elect between cash and AT&T shares, subject to
the same aggregate proportion of cash and stock. Our offer
represents a 17 percent, or $8.6 billion, premium to the value of
MediaOne's previously proposed merger with Comcast based
on the closing price of Comcast's shares today. This is a 44
percent premium to the trading price of the MediaOne shares
prior to announcement of its merger agreement with Comcast
and a 26 percent premium to today's MediaOne closing price.
In addition, the future value of the AT&T shares we are offering,
which are voting, cash dividend-paying shares, is far greater
and more reliable than the non-voting, non-cash
dividend-paying Comcast shares.
In developing this proposal, we have worked together with
Amos B. Hostetter, the former chairman and chief executive
officer of Continental Cablevision and former chief executive
officer of US West Media Group. Upon consummation of the
transaction, Mr. Hostetter would become the non-executive
chairman of AT&T's Broadband & Internet Services business
unit and would join the AT&T board of directors. We would also
expect to invite one of MediaOne's current directors to join the
AT&T board upon completion of the merger.
The combination of our two companies is truly a powerful
opportunity for both companies and our shareholders, as well
as for employees, and will provide significant benefits to the
American public. The merger will accelerate our ability to bring
a wide array of broadband services to consumer and business
customers across the nation. The AT&T and MediaOne
networks are complementary, and together they will be digital,
high-speed, and nationwide. With the addition of the MediaOne
local broadband systems, we will offer customers superior
connections for not only traditional video services, but also new
competitive voice and data services. In particular, this will
enhance our ability to deliver competitive local telephone
services to millions of Americans.
Beyond our network, AT&T offers MediaOne access to
unparalleled technology and service capabilities to enhance its
offers and increase its services to its communities. These
technology and service attributes will provide MediaOne with
long-term sustainable advantages. The combination will also
allow us to join the management talents of our two companies.
With our Broadband & Internet Services group headquartered in
Denver, we will be able to combine readily and smoothly with
MediaOne's Denver-based headquarters.
We are quite confident of our ability to complete this
transaction as quickly, if not more quickly, than the proposed
Comcast merger. We have received commitments from Chase
Manhattan Bank and Goldman Sachs Credit Partners L.P.
aggregating $10 billion towards a credit facility. As lead
arrangers, they have also advised us that they are highly
confident of their ability to raise financing for the balance of the
cash portion of our offer. In addition, our legal advisors are
confident of our ability to obtain all necessary approvals in a
timely manner.
We believe that our merger is fully consistent with the policy
underlying the ownership limits that were contained in
the now-suspended FCC cable ownership rules and is
strongly in the public interest. However, should any
questions arise with respect to this issue, we are ready
to take such actions as are necessary to ensure timely
legal and regulatory approval of the merger.
Given the clear superiority of our offer to the proposed
Comcast merger, we would like to meet with you and
your advisors as soon as possible to finalize a definitive
agreement between our companies. The offer is, of
course, subject to entering into such an agreement. In
this regard, we are ready to enter into a merger
agreement comparable to the Comcast agreement. We
are also ready to exchange confidential information
immediately. We are committed to bringing an
AT&T/MediaOne combination to a successful
conclusion and would be delighted to discuss any
aspect of our proposal. We look forward to meeting at
the earliest opportunity to conclude this mutually
beneficial transaction for both our companies. In
addition, we and our advisors will be happy to meet with
MediaOne at any time to answer any questions about
our proposal.
Sincerely,
C. Michael Armstrong |
