Comcast, Time Warner Lead in Chase for Adelphia's L.A. Asset
WALL STREET WEST
With Adelphia Communications Corp. entertaining bidders for its cable assets, Wall Street is sizing up the field of potential buyers for the cable company's seven clusters including the largest and most valuable California/Western package.
Time Warner Inc., which came in second to Sony Corp. in the bidding for Metro-Goldwyn-Mayer Inc., is said to be a frontrunner for the California package.
But another leading bidder could be Comcast Communications Corp., which made an unsolicited offer for Walt Disney Co. earlier this year and has designs on having a dominant share of the 20 largest cable markets in the country.
Through its AT & T; Broadband unit, Comcast has 41 percent of the more than 631,000 cable subscribers in the city of Los Angeles. Adelphia, the No. 2 franchisee in the city, has about 38 percent.
One cable industry analyst said that systems generally trade at between $1,000 and $4,000 per subscriber and, after discounting less valuable assets outside Los Angeles, suggested the local cluster could fetch as much as $4 billion. That's a hefty chunk of the $17 billion Adelphia valued itself at earlier this year.
Adelphia Chief Executive Bill Schleyer told Bloomberg News that the asset sales would raise funds and repay creditors owed more than $18 billion. Adelphia has signed more than 20 confidentiality agreements with potential buyers so far, Schleyer said. Final bids for the assets are expected by year-end.
One local complication could involve new long-term franchise agreements the city of L.A. is trying to hammer out with its five franchisees. Adelphia's contract had been operating on a month-to-month basis while the other four had been operating under the terms of agreements that ran out two years ago and were extended this summer fort another year.
It's been an intense year for Calpers' Sean Harrigan.
In its campaign to improve corporate governance, the giant state pension fund has taken on Richard Grasso, the former chairman of the New York Stock Exchange; Walt Disney Co. Chief Executive Michael Eisner; and a slew of corporate board members, most notably Berkshire Hathaway Inc. Chairman and Chief Executive Warren Buffett, who is also a director of Coca-Cola Co. and sits on its audit committee.
In several instances, the California Public Employees' Retirement System came out on top. Harrigan, meeting with Business Journal editors last week, pointed out that the highly paid Grasso is gone from the NYSE, and Calpers is happy with many of the reforms that the institution has since undergone.
Likewise, Disney's board has set a short timetable for Eisner's departure. Calpers has dogged Disney directors to become more independent, and it was a leader in the fight that ultimately led to Eisner being replaced as chairman by former Sen. George Mitchell.
"I think George is doing a good job," Harrigan said, noting that the board has consulted institutional investors, including Calpers, on Eisner's departure. "I think they wanted to become a better company."
But it was the accounting fight, in which the highly regarded Buffett pooh-poohed Calpers' efforts to promote auditor independence as "silly," that put the pension fund on the defensive.
The criticism led Calpers to review its litmus-test approach, a review that is ongoing. While changes are being considered, Harrigan said he's not dissatisfied with the first-year results of the campaign. "The fact that it got so much attention isn't all so bad," said Harrigan, president of the Calpers Board of Administration.
Calpers' upcoming priorities are health care and a proposal to allow investors to nominate company shareholders. Calpers, a huge consumer of health care on behalf of its pension plan members, supports Proposition 72, the ballot initiative that would require California employers to provide mandatory health care coverage to their workers.
Harrigan, a longtime official with the United Food and Commercial Workers Union, also reflected on the four-month strike/lockout between grocery workers and supermarkets in Southern California, which ended with an agreement mostly on the employers' terms.
Harrigan pointed out that expenses were huge on each side the union spent $100 million alone the work force is unhappy, and relations with management have been seriously damaged.
"(Safeway Chairman and Chief Executive) Steve Burd has been saying this was a huge victory for the industry," Harrigan said. "I happen to believe it was a huge failure for all of us."
The Sept. 27 Wall Street West item above "Scoring Calpers" misstated a corporate governance proposal that Calpers is supporting. The proposal would allow shareholders to nominate company directors.
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