<BREAKFAST WITH THE FOOL>
Monday, March 22, 1999
"Few great men could pass personnel." -- Paul Goodman
Comcast to Buy MediaOne
Comcast Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMCSK)") else Response.Write("(Nasdaq: CMCSK)") end if %> and MediaOne Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UMG)") else Response.Write("(NYSE: UMG)") end if %>, the nation's fourth and third largest cable providers respectively, have agreed to merge to become the world's biggest broadband communications company. The deal values MediaOne at $80.16 a share, based on Friday's close, which represents about a 32% premium over MediaOne's last closing price of $60.75. The merged company will serve more than 11 million U.S. cable customers and cover 18% of domestic households with its cable infrastructure.
The companies generated more than $8 billion in combined 1998 revenues and about $2.4 billion in EBITDA (earnings before interest, taxes, depreciation and amortization). MediaOne shareholders will swap each share they own for 1.1 Comcast shares, giving them around 64% ownership of the combined company. Comcast Chairman Ralph Roberts and President Brian Roberts will retain their posts, and MediaOne Chairman, President, and CEO Chuck Lillis will become vice chairman. Three other MediaOne representatives will also join Comcast's board, bringing the number of directors to 14.
In addition to its cable service operations, Philadelphia-based Comcast also owns QVC, Comcast SportsNet, and a controlling stake in E! Entertainment Television. MediaOne, based in Englewood, Colorado, provides cable in the U.S. as well as wireless communications services abroad -- in the U.K., Poland, Hungary, the Czech Republic, Slovakia, Russia, Malaysia, and India.
News to Go
Microsoft <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> is about to begin talks with the Justice Department and 19 states to settle the historic antitrust lawsuit against the company, according to The Wall Street Journal. The trial is slated to resume April 12 but will likely be delayed in light of the imminent settlement talks, which were encouraged by the U.S. district judge presiding over the case.
Following Paris-based specialty retailer Pinault-Printemps-Redoute's $2.9 billion investment in Italian fashion house Gucci <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GUC)") else Response.Write("(NYSE: GUC)") end if %> late last week, LVMH Moet Hennessy Louis Vuitton <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LVMHY)") else Response.Write("(Nasdaq: LVMHY)") end if %> made two alternative offers: one for all Gucci shares other than those owned by Pinault-Printemps-Redoute for $85 a share, and the other for all outstanding shares for $81 a pop. Under last week's deal, Pinault-Printemps-Redoute is buying a 40% stake in Gucci at $75 a share. Gucci, which has been maneuvering to fend off advances by LVMH, dismissed the first offer because it isn't open to all shareholders but said it is giving the second offer "serious consideration."
America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> may cut more jobs than initially anticipated -- up to 20% out of 2,500 -- at newly acquired Netscape Communications, The Wall Street Journal reported. AOL is considering a broad reorganization, including cost reductions and structural changes in departments that had been expected to be left relatively intact.
PC maker and direct seller Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> wants to increase the number of shares it can issue to 1 billion from the 220 million currently authorized to use for acquisitions, stock dividends, and stock splits without having to seek shareholder approval in advance.
Industrial giant Vivendi SA of France said it will acquire U.S. Filter Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USF)") else Response.Write("(NYSE: USF)") end if %>, the nation's largest water company, in a cash deal valued at about $6.2 billion, or $31.50 a share -- a 3% premium over U.S. Filter's closing price Friday of $30 1/2. U.S. Filter was trading in the mid-$20 range until the middle of last week.
America West Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AWA)") else Response.Write("(NYSE: AWA)") end if %> and its flight attendants announced a tentative agreement on a five-year contract, averting a strike. Details of the agreement, which requires approval by members of the flight attendants' union, were not disclosed.
In other union news, AMR Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> American Airlines has reportedly resumed negotiations with its pilots' union in an attempt to resolve through mediation the dispute that led to the pilots' sick-out earlier this year that cost the company $200 million to $225 million before taxes. Last week, AMR warned that it expects first-quarter earnings to come in between $0.30 and $0.35 a share, substantially below analysts' then mean estimate of $0.65.
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Yi-Hsin Chang (TMF Puck), Writer
Jennifer Silber (TMF Amused), Editor