Cox plans to buy TCA Cable and become No. 4 in industry

$4 billion deal adds 883,000 subscribers mainly in Texas, Ark., La.

Communications

May 13, 1999|By BLOOMBERG NEWS

ATLANTA -- Cox Communications Inc. agreed yesterday to buy TCA Cable TV Inc. for about $4 billion in stock, cash and assumed debt, moving to become the fourth-largest company in the rapidly consolidating U.S. cable industry.

Shareholders of TCA, which has 883,000 subscribers mainly in Texas, Arkansas and Louisiana, will get about $63.89 a share. They may choose cash, stock or a combination of $31.25 in cash and 0.3709 share of Cox Class A stock. Cox will assume $736 million of TCA debt.

Cox, which agreed last month to buy Media General Inc.'s cable systems for $1.4 billion, has been on an acquisition spree in the past year, as have a number of its competitors. Cable companies including AT&T Corp., Time Warner Inc. and Comcast Corp. want to build larger regional groups of subscribers to spread out the cost of new programming and digital services such as high-speed Internet access and local telephone service.

"I think you'll see Cox continue to expand," said Gerard Klauer Mattison analyst Michael Florin. "If they want to be one of the surviving entities, they still need to get bigger."

Florin said Cox still could be considered an acquisition target even after the TCA purchase, though it is now in position to fetch a better price. "People buy size," he said.

Cox, currently the No. 5 U.S. cable company, will pay about $4,115 per customer for Tyler, Texas-based TCA, said Jimmy Hayes, chief financial officer of Cox. That is less than the per-customer figure in some other recent acquisitions.

"The price is right," said Merrill Lynch analyst Jessica Reif Cohen. "It's in the middle of the industry multiple."

Atlanta-based Cox will pay about $5,400 a subscriber for Media General's systems in Virginia, while AT&T has offered about $4,700 each for MediaOne Group Inc.'s customers.

TCA Cable shares yesterday rose $7.97 to $60.03. Cox shares fell $1.94 to $86.06.

The TCA and Media General transactions will give Cox about 5 million subscribers, an important threshold for cable companies, which achieve efficiencies of scale as they grow.

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