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Adelphia's For Sale, But It's All or Nothing

4/25/2004 08:00:00 PM Eastern

Cable operators hungry for a deal are cheering Adelphia Communications' decision to put its 5.4 million-subscriber portfolio up for sale. But Adelphia is disappointing them by refusing to break its operations up into several clusters. It wants to sell the company in one piece.

Adelphia CEO Bill Schleyer says a breakup creates too many problems, particularly triggering some tax land mines. "We're definitely only going to sell the company as a whole," he says. "The issue of selling it in pieces is incredibly complex."

But Adelphia's price tag—expected to run between $17 billion and $20 billion—might be a powerful dissuader.

To some, Adelphia's parts are more interesting than its whole. Cox, Comcast, and Time Warner openly covet the 1.3 million-subscriber metro Los Angeles operation. That market is Balkanized among several cable operators and cries out to be consolidated in the hands of one player, like the Chicago and San Francisco metro areas. A similar bidding war could be created in upstate New York and in Cleveland. A few buyout firms would likely bid for smaller units.

Schleyer and sidekick Ron Cooper, Adelphia's COO, had resisted a sale while the company is in Chapter 11, arguing that creditors will get more money out if they reorganize, get operations running better, and sell later. Creditors pressured them to change their strategy.

The big snag: Two big buyers are tied up. It's hard for Time Warner to deal while the SEC continues to examine past accounting practices. And Comcast has been in the hunt for Walt Disney Co., although that doesn't seem to be going anywhere.

Some creditors have criticized Schleyer and Cooper's resistance to selling now, noting that the executives' compensation deals give them less of a personal payout if Adelphia sells before completing Chapter 11. Schleyer denies that motivation: "My compensation package has nothing to do with any strategic decision this company made and never will."

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