Charter Communications to Buy Falcon Cable for US$3.6 Billion, NYT Reports
By Greg Wiles
Charter Communications to Buy Falcon, WSJ Reports (Update2)
(Rewrites 1st to 6th paragraphs.)
London, May 26 (Bloomberg) -- Charter Communications Inc.,
the cable TV company owned by Microsoft Corp. co-founder Paul
Allen, will buy closely held Falcon Cable Holdings for $3.6
billion in cash and stock, the Wall Street Journal reported.
Charter, the seventh biggest U.S. cable operator, will pay
$2 billion in cash and stock and take on Falcon's $1.6 billion
debt, the WSJ Interactive edition said, citing people close to
the talks. St. Louis-based Charter and Los Angeles-based Falcon
are expected to announce the sale today. Charter could not be
reached and a spokesman for Falcon declined comment.
The transaction is the latest in a string of acquisitions
for Allen, the world's 4th richest person with assets of $21
billion, according to Forbes magazine. Charter will be the fifth
biggest cable operator with about 4.8 million subscribers once
all the deals are closed. The Falcon values each of Falcon's 1
million subscribers at $3,600.
''He's going for economies of scale,'' said Saeed Baradar, a
cable analyst at Morgan Stanley Dean Witter. ''With cable likely
to win out as the distributor of multimedia and Internet
services, it is important to build subscriber numbers now.''
He said the purchase could also increase the use of
Microsoft's Windows CE software on cable TV set-top boxes.
Falcon's acquisition was also reported by the New York Times
newspaper. About 46 percent of Falcon's shares are owned by AT&T
Inc., the biggest long-distance company that has become the top
U.S. cable provider with its own string of acquisitions.
Falcon, with operations in California, Oregon, Missouri,
Washington, North Carolina and Georgia, had been contemplating a
sale of a portion of the company through an initial stock sale to
the public. This year, it reviewed a $200 million to $300 million
sale of stock to raise money to pay down debt incurred in
upgrading its cable systems.
Share Sale?
Charter Communications also has talked about selling shares
through an initial public offering to take advantage of
skyrocketing values for cable companies. The stock sale would
also provide publicly traded shares it could use in acquiring
other cable properties.
Allen last year entered the cable arena by buying Charter
and Marcus Cable Properties Inc. for $7.7 billion in cash and
assumed debt. His announced acquisitions so far this year are
estimated at more than $4.5 billion, not counting the purchase of
Falcon.
In March, Charter agreed to buy privately held Helicon Cable
Communications for $550 million in cash to expand in the eastern
and southern United States.
The cable acquisitions are part of a larger strategy by
Allen to invest in companies that bring computer and
communications technologies into U.S. homes.
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