The tentative deal would give Adelphia's creditors $12 billion in cash and a stake in a new combined venture between Time Warner and Adelphia valued at around $6 billion, according to media reports.
Comcast and Time Warner shares rose Friday as analysts and investors focused on the benefits of the two-way deal for the failed and scandal-sodden cable company. Apparently, the less-than-comprehensive $16.5 billion cash offer from
, as reported by
The Wall Street Journal
Thursday, wasn't enough to sway Adelphia's controlling interests, or force a higher offer from Comcast and Time Warner, say analysts.
"We think Comcast's stock should rise given that the offer price did not increase," writes Oppenheimer & Co. analyst Tom Eagan, who has a buy on the stock.
Analysts were also encouraged that the deal would allow Comcast to unwind its stake in Time Warner and add about 2 million Adelphia subscribers.
Comcast inherited the Time Warner stake when it acquired
. But Comcast faced a $1 billion tax bill if it sold its Time Warner stake, which was valued as high as $8 billion.
This "allows Comcast, on a tax-free basis, to swap out is 21% stake in Time Warner for a 100% stake in roughly 2 million-to-2.25 million subscribers," writes Eagan in a research note Friday.
Cable executives have convinced many investors that
bigger is better in the broadcast industry because scale helps when negotiating lower programming costs.
Adelphia, the nation's fifth-largest cable operator, collapsed into bankruptcy in 2002 amid charges of an accounting scandal that included accusations that company founders were pilfering money for personal use.
Last year, Adelphia founder John Rigas and one of his sons, Timothy, were found guilty on fraud and conspiracy charges. Those stemmed from the commingling of the Rigas family's finances with that of the cable TV operator that the elder Rigas and his family had controlled for decades.
Adelphia had hoped to emerge from bankruptcy as a free-standing entity, but that strategy failed as creditors warmed to a buyout from Comcast and Time Warner.
Comcast shares rose 31 cents to $33.59 and Time Warner added 32 cents to $18.20. Meanwhile, Cablevision shares rose slightly on relief that its offer for Adelphia wasn't accepted.
Cablevision also moved one step further to shut down its high-definition satellite service called Voom. The board voted once again to pull the plug on the effort after company founder Chuck Dolan failed to raise enough money to finance the operation, according to several published reports.