AOL-TW Makes Offer on AT&T's Cable-TV Division

Baldwin Louie — Sun, 09 Sep 2001 18:00:00 -0400

NEW YORK -- AOL Time Warner Inc. has made an offer for AT&T Corp.'s cable-television division, according to people familiar with the situation.

AOL (AOL) has proposed to merge AT&T Broadband, the nation's largest cable company, with its Time Warner Entertainment unit, a partnership with AT&T (T) that owns both programming and cable systems. Under such an arrangement, AOL would hold an interest in the range of 40% in the unit, giving AT&T the critical majority control that it wants.

The bid stems from talks between AT&T and AOL that started in July, when AT&T's board unanimously rejected Comcast Corp.'s (CMCSK) unsolicited $40 billion stock swap offer for the unit. AT&T had been concerned that Comcast's bid didn't give enough governance to AT&T shareholders.

No deal is expected imminently. AT&T's board is expected to gather bids from a number of suitors so a variety of options can be discussed at its board meeting later this month, beginning on Sept. 20. Cox Communications Inc. (COX) has also been talking to AT&T and remains interested, according to people familiar with the situation. Cox hasn't submitted a formal bid yet, however, according to
those people.

One person described the situation as very fluid, but AOL's interest could likely rankle Microsoft Corp. (MSFT) and Walt Disney Co. (DIS).

A bid from AOL, whose Time Warner Cable unit has 12.7 million subscribers, could attract intense regulatory scrutiny because it could make AOL by far the nation's largest cable operator with more than 25 million customers. AT&T's cable unit, now the largest, has 13.7 million customers, while Comcast is the third largest with 8.5 million subscribers.

Liberty Media Corp. (LMCA) Chairman John Malone disclosed the AOL bid at an investor conference Friday, according to news reports. Liberty Media is a significant shareholder in AOL, and Mr. Malone personally is a large shareholder in AT&T and a former member of the board of directors of AT&T.

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AOL-TW Makes Offer on AT&T's Cable-TV Division