Duel looms over MediaOne as Comcast plans next step Counteroffer to AT&T is explored in what could be spirited battle
LESLIE CAULEY
04/26/1999
The Globe and Mail
Metro
Page B10
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Comcast Corp. spent the weekend huddling with its bankers to come up with a counteroffer to AT&T Corp.'s unsolicited bid for MediaOne Group,paving the way for what could turn into a spirited battle between the two cable-television giants.
Even as Comcast continued to search for ways to stave off AT&T, MediaOne negotiated a confidentiality agreement with the phone company, the first step in proceeding with formal merger talks, said people familiar with the matter.
One executive said AT&T insisted, and MediaOne agreed, on a provision that would allow AT&T to wage a proxy fight for MediaOne if the two companies are unable to agree on terms. This would seem to signal that AT&T is bracing for a long and possibly hostile takeover attempt of the Denver-based cable company.
AT&T acknowledged yesterday that the fight was just beginning. "Clearly, it isn't over," said Dan Somers, AT&T's chief financial officer. MediaOne and Comcast declined to comment.
AT&T on Thursday stunned Comcast and Wall Street by offering about $54-billion (U.S.) in cash and stock for MediaOne . The unsolicited offer was made less than a month after Comcast had set plans to buy MediaOne in an all-stock deal valued at $48-billion. Under the Comcast agreement, MediaOne had 45 days to consider other offers, but it had to pay a $1.5-billion breakup fee if it accepted another bid. AT&T's bid arrived within that window of time, setting off the weekend's negotiating marathon between Comcast and its bankers.
On the New York Stock Exchange Friday, MediaOne closed up 11 per cent, or $7.87, at $77.37, and AT&T closed down 5.9 per cent, or $3.37, at $53.37 in composite trading. Comcast closed up 18 cents at $67.81 on the Nasdaq Stock Market.
According to people close to the Comcast camp, AT&T's surprise bid prompted a flurry of calls to Comcast from a range of companies offering to serve as a friendly suitor, or the so-called white knight, including Microsoft Corp., America Online Inc. and software magnate Paul Allen. These people say Microsoft chairman Bill Gates personally called a number of times to inquire about Comcast's predicament, as did AOL chairman Steve Case and Mr. Allen, a Microsoft co-founder and billionaire whose holdings include cable properties.
According to these same people, Messrs. Gates, Case and Allen have expressed concern about allowing AT&T to amass too much control over the cable-TV industry, which the three executives consider vitally important to their own companies' long-term financial health. Microsoft holds a 5-per-cent stake in Comcast.
People close to Comcast said others have called to express similar concerns about AT&T's bid. If it is successful, AT&T would have control of or influence over 65 per cent of cable-TV customers in the United States. "There are a lot of folks out there, including people who will have no part in this deal, who don't want AT&T to have that kind of control," said one person close to the Comcast camp.
It's not clear how far Microsoft, AOL and Mr. Allen would be willing to go to get involved in a Comcast counterbid. Such a move would no doubt be interpreted by AT&T as a hostile manoeuvre. The phone company has made it clear that it considers any company that isn't helping its cause to be a rival. One person close to the AT&T camp said AT&T chairman C. Michael Armstrong spoke with Mr. Gates, Mr. Case and Mr. Allen over the weekend, and was "led to believe" that none was interested in helping Comcast.
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