Comcast bids for AT&T cable system

In an attempt to become the largest U.S. cable company, No. 3 cable television provider Comcast yesterday made an unsolicited $58 billion offer for AT&T Broadband’s cable properties.

In a letter to AT&T, Comcast outlined a proposal to purchase AT&T’s core cable broadband assets. The company offered to purchase $44.5 billion in stock and assume $13.5 billion of AT&T debt. The transaction would be tax-free to AT&T and its shareholders.

Included in the deal are AT&T’s 13.5 million customers and joint-venture interests in other cable systems. The proposal does not include AT&T’s stake in Time Warner Entertainment, Cablevision Systems and Rainbow Media. During a conference call today, Comcast President Brian Roberts said the company is prepared to purchase the additional assets separately.

If approved by regulatory bodies, Roberts said the new company would generate an estimated $15 billion in cable revenues this year and serve 22 million customers. It would also create the third-largest media company, behind Viacom and AOL Time Warner.

With current plans for a tracking-stock IPO for the broadband unit later this year, AT&T issued a statement saying it has no intention of selling its broadband business but would, “evaluate the Comcast proposal and do what is in the best long-term interest of our shareholders.”

Under the deal, AT&T would retain ownership of its consumer and business units, and shareholders would own a 51% economic and voting interest in the merged company. Roberts said Comcast’s stock price offering is 75% of AT&T’s total value is a “full and fair acquisition price.”

“If you take AT&T’s stock on Friday on a when-issued basis… [it] closed at $16.80,” Roberts said. “Our offer represents $12.60 just for the cable systems and joint ventures.”

Roberts and his father, Comcast Chairman Ralph Roberts, would have a 49% minority voting stake in the combined company, but would effectively retain control as the voting majority would be spread across millions of shareholders.

Roberts also noted Comcast’s offer champions AT&T’s decision in October to divide the company into separate entities.

“That plan immediately triggered an idea that Comcast had as to how we could accelerate their board’s plan,” Roberts said. “What this would therefore do is dramatically accelerate AT&T’s own plan to separate the broadband company.”