Under pressure for all the demands on its cash, Adelphia Communications is trying to scrap its agreement to buy Maryland MSO GS Communications at a record-breaking price.
Adelphia agreed in June to by 115,000-subscriber GS for a huge price that industry executives at the time said was $750 million, or $6,000 per subscriber. Adelphia and GS have gone to court wrestling over the deal. Adelphia disclosed in an SEC filing Tuesday that it wants out of the deal, contending that GS hasn't met with certain covenants laid out in its contract to buy the systems.
Adelphia wouldn't specify what those covenants were, but is asking a Pennsylvania state judge to for a delcaration that it "is not immediately obligated to close on the transaction.." Adelphia and GS executives did not return calls seeking comment. But the MSO faces demands from anxious investors and debt ratings agencies worried about the checks Adelphia is writing for for things like system buys and support of its hemmoraging phone subsidiary Adelphia Business Solutions.
Adelphia Chairman John Rigas has pleased Wall Street by curtailing Adelphia Business' expansion plans, which had looked like a black hole for the MSO. Adelphia's willingness to bid so aggressively for GS was always questioned by Wall Street. The valuation was well over the previous record of $5,400 per subscriber Cox Communications set when it bought Media General Cable in 1999.
The systems are in Adams and York counties, Pa.; Jefferson and Berkeley counties, in West Virginia; and Madison and Culpeper counties Virginia. While Adelphia has some systems nearby, it's not as if the deal fills out Adelphia's clusters in Miami, Los Angeles or even Buffalo. GS has successfully petitioned to move the suit from state court to federal court in Harrisburg, Penn.
- John Higgins