Ron...while cash is king, if AOL/Comcast offered a high enough premium over AT&T's bid, the advantage of cash would be eliminated. Additionally, many investors prefer stock deals, because they are non-taxable events. In other words, when a stock you own is bought, and you get stock of the acquiring company, you do not have to pay tax. You simply keep your original basis and pay tax when (and if) you sell the stock of the acquiring company. A perfect example is XCIT shareholders, who will pay no tax when they get ATHM shares. On the other hand, when your stock is bought for cash, then that IS a taxable event, and you have to pay capital gains taxes. If a Media One shareholder is holding onto huge non-realized gains, that shareholder may prefer stock to cash. (In fact, not having to pay capital gains tax can save 20% or more.)
Having said that, when this is all over, I predict AT&T will own Media One for several reasons: (1) For AOL to get involved would be to acknowledge that their broadband plan is inadequate. (2) Even if they did get involved, it would only give them access to Comcast and Media One homes. That is not the nationwide coverage they seek. (3) The deal would be dilutive, and their shareholders would not take that very well. (Their stock would go down a lot more that AT&T did after the announcement.) |
