Is Cox Poised For Acquisition Spree?

Joshua Cho

Cox Communications Inc. is looking to acquire cable systems, Cable World has learned, but MediaOne Group, Inc. is not one of them.

According to a source at Cox, "We don't intend to be sellers, we intend to be buyers." The source, however, would not comment on which properties the company was currently looking at.

Since the merger of AT&T Corp. and Tele-Communications Inc., the cable industry has consolidated dramatically. Indeed, last month, Adelphia Communications Corp. announced a merger with Century Communications Corp. and Comcast Corp. said it would acquire MediaOne Group Inc. More consolidation is expected, making every cable MSO either a take-over target or a buyer. But the availability of large, highly clustered MSOs is dwindling.

Indeed, early last week a report surfaced in the New York Post saying that Cox had hired Merrill Lynch to "challenge" Comcast Corp.'s $60 billion proposed acquisition of MediaOne.

A Cox source denied that report, but said that the company had used Merrill to explore several acquisitions in the past, including MediaOne, but that an offer was never made. "We have been talking about acquisitions," said the source, "but not that particular one," referring to MediaOne.

Analysts and Wall Street generally did not believe that Cox would overbid for MediaOne, because of the high price that Comcast is paying for the property and, to a lesser extent, the $1.5 billion breakup fee that is baked into that deal. Part of that deal also calls for a 45-day waiting period whereby MediaOne can accept but not solicit a better offer. Comcast is paying something on the order of $4,000-$5,000 per MediaOne subscriber. AT&T's $55 billion acquisition of TCI, by comparison, went for around $3,000 per subscriber.

Some analysts, however, believe that Cox could in theory pull off an overbid of MediaOne.

"I think its probably nothing more than speculation, but it's speculation that could be do-able if management decided to pursue it. They clearly have the means," said ING Baring Furman Selz analyst Fred Moran.

Analysts also noted that while there have never been overbids in the history of cable, bidding wars are not uncommon in the media/entertainment industry in general.

There has also been long-standing speculation that Amos Hostetter, MediaOne's former chief, wants to get back into cable, but according to one portfolio manager, he has not been very successful in coming up with a partner to pursue those goals. The Post article suggested that Hostetter was possibly teaming up with Cox to overbid for MediaOne. Calls to Hostetter's office were not returned.