Comcast, Jones Rise on Completion of Stock Deal

Comcast finally closes a $3 billion deal to purchase the outstanding shares of Jones Intercable.
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Shares of both cable television operator

Comcast

(CMCSK)

and

Jones Intercable

(JOINA)

rose Wednesday after Comcast finally reached an agreement to buy all the outstanding shares of Jones in a stock deal valued at about $3 billion.

Comcast had previously tried and failed in August to increase its stake in Jones.

Comcast's class A stock gained 1 5/16, or 3%, to close at 52 3/16. Jones common stock

(JOIN)

surged 7 1/4, or 12%, at 69 1/2, after touching a 52-week high of 70 3/8, while Jones's class A shares ended the day ahead 3 3/16, or 5%, at 70.

The deal represents the latest acquisition in the rapidly consolidating cable sector.

Based in Philadelphia, Comcast, the third-largest cable television provider in the U.S., currently owns 40% of Jones' equity and controls the voting rights.

Under the terms of the agreement, Jones shareholders will receive 1.4 shares of Comcast class A special common stock for each share of Jones Intercable.

Based on Tuesday's closing prices, Comcast is offering $71.40 per share, a 13% premium to Jones' common stock and a 6.8% premium to Jones' more heavily traded class A shares.

The deal for $3 billion in equity and $1.6 billion in debt tops Comcast's previous $51.31 per share offer, which was considered by investors and analysts to be unfairly low.

"A special committee of the independent directors of Jones Intercable, Inc. considered Comcast's exchange offer and proposed the merger to Comcast as a transaction that would be substantially more attractive to Jones Intercable shareholders," Comcast said in a statement.

In August, Comcast had offered to exchange 1.4 shares of Comcast for each Jones share up to 79% of Jones' outstanding common and class A common stock. At the time Comcast was trading at $35.

Analysts applauded the deal. Laura Martin, a cable analyst for

Credit Suisse First Boston

, said Comcast would make the necessary investments to provide Jones' subscribers with improved services now that it owns 100% of the company.

"Comcast will now go full board," said Martin, who has a buy rating for Comcast and has done underwriting for the company. She does not rate Jones.

"Jones subscribers will have more access to high-speed data and digital TV than they otherwise would have had," she said.

David Lee Smith, a media analyst at

Dain Rauscher Wessels

in Austin, Texas said he expected Comcast to use the acquisition to build strategic regional clusters, or subscriber groups.

"Jones is more spread out, but it gives Comcast assets they can later swap for more contiguous ones," said Smith, who does not rate and has not done underwriting for either of the companies.

The deal caps a major run of mergers and acquisitions for Comcast and represents the consolidation mania that has swept the cable industry. Over the past year, Comcast has increased its subscriber base to 8.2 million customers from 4.6 million.

Comcast said the deal, which is subject to various approvals, would close during the second quarter of 2000.