Adelphia cable approves 2.5% breakup fee

Suitors Time Warner, Comcast would be paid

April 20, 2005|By BLOOMBERG NEWS

NEW YORK - Adelphia Communications Corp., the fifth-largest cable operator, agreed yesterday to pay prospective buyers Time Warner Inc. and Comcast Corp. a breakup fee equal to 2.5 percent of the purchase price should it sell to another bidder.

Time Warner and Comcast have offered to buy Adelphia for $17.6 billion to $18 billion, according to people familiar with the matter. Those purchase prices would yield a break up fee of $440 million to $450 million. Both the breakup fee and sale require court approval.

The breakup fee would come from the proceeds of the sale, Adelphia said in court papers filed in U.S. Bankruptcy Court in New York. Earlier yesterday, Cablevision Systems Corp. raised its offer to buy Adelphia to $17.1 billion from $16.5 billion, according to people familiar with matter.

"The breakup fee is very common," said Stuart Erickson, principal at Miller Buckfire Ying & Co., which advises bankrupt companies looking to sell their assets. "I wouldn't think this would scare off potential acquirers."

Greenwood Village, Colorado-based Adelphia is selling its assets to repay creditors owed more than $18 billion.

Erickson said average breakup fees range from 2.5 percent to 3 percent.

Adelphia "has agreed to the amount of the breakup fee now requested by Time Warner and Comcast, which is 2.5 percent of the purchase price," Adelphia said in court papers.

Adelphia has been marketing its assets for more than a year. The company said it is finalizing the terms of the asset purchase agreement with Time Warner and Comcast. The cable operator said the joint offer "is the bid most likely to maximize the value of proceeds to stakeholders."

Time Warner and Comcast would also be eligible to receive the fee if Adelphia didn't file court papers seeking approval of a plan to leave bankruptcy by Oct. 15, court papers say.

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