Time Warner, Comcast Corp. closes deal with Adelphia Comm.

The deal between, media group Time Warner Inc. and its bidding partner, top U.S. cable TV operator Comcast Corp. to buy bankrupt cable operator Adelphia Communications Corp. for nearly $18 billion, finalized late on Thursday after several days of frenzied activity, is now subject to approval by a bankruptcy court judge and a majority of each class of Adelphia’s creditors.

The tentative deal with Adelphia’s creditors beat back a last-minute rival offer from cable firm Cablevision Systems Corp., which was preparing a bid of $16.5 billion in cash.

Time Warner, which is contributing a large percentage of the bid, could become the dominant multiple system operators in the highly sought-after Los Angeles market by garnering subscribers from both Adelphia and Comcast, Sanford Bernstein analyst Michael Nathanson said in a research note. And it can unwind a stake Comcast owns in its Time Warner Cable business by trading some of its new Adelphia subscribers to Comcast.
Comcast, for its part, could get 2 million new cable subscribers and the chance to liquidate its stake in Time Warner Cable in a tax-free swap, Nathanson said.

Time Warner and Comcast will pay Adelphia bondholders in cash and stock warrants, one source said. The New York Times reported that they would pay about $13.5 billion in cash and about $4.5 billion in warrants for stock in a new company formed by combining Time Warner’s cable business and Adelphia.

Comcast will contribute about $2 billion in cash and swap its 21 percent stake in Time Warner’s cable business in exchange for about 2 million of Adelphia’s subscribers. Time Warner is paying about $3 billion in cash and borrowing about $8 billion secured against the combined business.

Shares of Time Warner jumped $0.28 to $18.16 in recent trading, while shares of Comcast climbed $0.30 to $33.58. Adelphia shares raised $0.02 to $0.27.

Spokesmen for Time Warner, Comcast and Adelphia declined to comment on the deal

Adelphia, which operates in 31 states, began its downward slide after the founder John Rigas and two of his sons were accused of mingling company money with their own resources and looting billions from the firm.

The company filed for bankruptcy in 2002, and is auctioning its assets to repay creditors seeking more than $3 trillion after the company’s June 2002 bankruptcy. Last summer John Rigas, Adelphia’s founder, and his son Timothy, Adelphia’s former chief financial officer, were convicted of fraud and conspiracy. They are awaiting sentencing.

Adelphia is expected to pay about $725 million to U.S. authorities to settle claims stemming from the accounting and management scandal, sources close to the situation have said.