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The following press release was issued by Comcast Corporation:
COMCAST PRESS RELEASE
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FOR IMMEDIATE RELEASE
COMCAST MAKES PROPOSAL
TO MERGE WITH AT&T BROADBAND
Offers $58 Billion for Core Broadband Assets
Plus Additional Value for Non-Core Investments
Strategic Combination Would Create World's Preeminent
Provider of Broadband Communications Services
PHILADELPHIA - July 8, 2001 - Comcast Corporation (Nasdaq: CMCSA, CMCSK) today
announced that it has made a proposal to AT&T (NYSE: T) to merge with AT&T's
broadband business in a tax-free transaction. The combination would create the
largest broadband communications provider in the world with approximately 22
million subscribers and leading positions in eight of the nation's 10 largest
markets.
Terms of the proposed transaction:
o Comcast would issue 1.0525 billion shares of Comcast stock with a value
of $44.5 billion based on Friday's closing price and would assume $13.5
billion in debt for AT&T's core broadband business, which is composed of
AT&T's 13.5 million cable subscribers and its joint venture interests.
o Comcast is also prepared to acquire AT&T's interests in Time Warner
Entertainment, Cablevision, and Rainbow Media by assuming more debt and
issuing more equity to reflect their value.
o AT&T shareholders would own a majority of the economic and voting
interests of the combined company.
o Comcast's offer delivers a multiple of 30x both 2000 EBITDA and
annualized first quarter 2001 EBITDA, which in either case far exceeds
the trading multiple of any publicly traded broadband company.
o AT&T shareholders would receive a very substantial premium over
published reports of the estimated value of AT&T's broadband business.
Comcast's offer represents a value of over $4,000 per subscriber.
o AT&T shareholders would receive Comcast shares valued at $12.60 per AT&T
share based on Friday's closing price (75% of AT&T's current per share
market value), while retaining complete ownership of AT&T's historical
communications business that according to published reports has a value
approaching $70 billion on a standalone basis. This combined value is
dramatically higher than AT&T's current market value per share of $16.80
(after taking into account the AWE distribution).
2
Comcast expects to generate combination benefits of at least $1.25 billion
annually upon the full integration of Comcast and AT&T Broadband, with a
potential to increase these benefits to between $2.6 billion and $2.8 billion
annually as the companies work together to improve AT&T Broadband's margins. As
a result of these combination benefits, merging Comcast and AT&T Broadband would
be value accretive to both groups of shareholders.
"This is an extremely compelling combination for AT&T and Comcast shareholders,
customers and employees," said Mr. Ralph J. Roberts, Chairman of Comcast.
"AT&T's board of directors has the opportunity not only to deliver a
considerable premium to its shareholders, but also to create both tremendous
growth and significant value for the long-term. In my judgment, the new company
would be ideally positioned to chart the course for the future of broadband."
"Over the last several months, we held discussions with AT&T Broadband regarding
this combination," said Mr. Brian L. Roberts, President of Comcast. "It's
unfortunate that we were unable to continue our dialogue. At this point,
however, we believe that AT&T's board of directors should consider our proposal
before a proxy statement relating to its broadband tracking stock proposal is
sent to AT&T shareholders later this month.
"Our proposal represents a dramatic acceleration of AT&T's plan to separate its
broadband business," said Mr. Roberts. "This combination would unlock the value
of AT&T's broadband assets while avoiding the market risks, costs and
uncertainties related to AT&T's planned broadband IPO. Significantly, under our
proposal, AT&T shareholders will be majority owners in the largest broadband
company in the world. And given our track record, I'm confident that they will
welcome our stock as currency."
Since its IPO in 1972, Comcast's stock has grown at a compound annual growth
rate of 24% compared to 12% for the S&P 500. Since 1998, Comcast's stock price
has appreciated nearly 168% compared to an approximately 23% increase for the
S&P 500. When measured in periods of one, three, five, seven and ten years,
Comcast's Class A Special shares have outperformed the cable composite index,
the S&P 500 and the Nasdaq.
Morgan Stanley, JP Morgan, Merrill Lynch and Quadrangle Group are financial
advisors to Comcast. Davis Polk & Wardwell is legal advisor to Comcast.
The full text of the letter submitted to the Board of Directors of AT&T is
attached.
***
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July 8, 2001
Mr. C. Michael Armstrong
Chairman and CEO
AT&T Corp.
32 Avenue of the Americas
New York, NY 10013
Dear Mike:
Over many months of discussions we have shared a vision that AT&T Broadband and
Comcast should be combined to create the world's leader in broadband
communications. We believed those discussions were progressing towards a
tax-free transaction that would dramatically accelerate your own plan to
separate the broadband company. It is unfortunate that we were not able to agree
on a basis for continuing our dialogue. Accordingly, we submit this offer to you
for consideration by your Board before a proxy statement relating to your
broadband tracking stock proposal is sent to your shareholders later this month.
Under our proposal Comcast would issue 1.0525 billion shares with a value of
$44.5 billion based on Friday's closing price and assume $13.5 billion in debt
for your core broadband business, which is composed of your 13.5 million cable
subscribers as well as your joint venture interests. In addition, we are
prepared to acquire your interests in TWE, Cablevision and Rainbow by assuming
more debt and issuing more equity to reflect their values. Under our proposal
your shareholders would own a majority of the economic and voting interests of
the combined company in a transaction that would be tax-free to AT&T and all
shareholders.
Our proposal values your core broadband business at $58 billion, which
represents 30x both 2000 EBITDA and annualized first quarter 2001 EBITDA. AT&T
shareholders would receive Comcast shares valued at $12.60 per AT&T share based
on Friday's closing price, while retaining complete ownership of AT&T's
historical communications business that according to published reports has a
value approaching $70 billion on a standalone basis. This combined value is
dramatically higher than your current market value per share of $16.80 after
giving effect to the spin-off of AT&T Wireless.
Your shareholders would receive significantly more value through a combination
with Comcast than through your planned restructuring. Not only does our proposal
avoid the market risks, costs and uncertainties inherent in the planned
broadband IPO, it values your business at a significant premium to your
potential public market valuation. At 30x AT&T Broadband's annualized first
quarter 2001 EBITDA, our offer far exceeds the trading multiple of any publicly
traded broadband company. Put another way, our proposal delivers a very
substantial premium over published reports of the estimated value of your
broadband business.
After combining our broadband businesses, your shareholders will retain a
majority of the future appreciation resulting from substantial combination
benefits. Upon full integration of our broadband businesses, we expect the
combination benefits will amount to at least $1.25 billion annually. This
benefit could eventually increase to between $2.6 and $2.8 billion annually as
we
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work together to raise the level of your margins. None of these figures take
account of any new content, internet or other value creating opportunities. As a
result of these combination benefits, merging our broadband companies will
clearly be value accretive to both groups of shareholders.
Given the strength of Comcast's balance sheet we are confident that the new
company would have an investment grade debt rating, a view which is shared by
our financial advisors, Morgan Stanley, JP Morgan and Merrill Lynch.
We understand that there were concerns within AT&T about Comcast's voting
structure. As you know, multi-class structures are common in our industry and
have not affected stock trading values. Our Class A Special shares have
outperformed the cable composite index, the S&P 500 and the Nasdaq in each of
the last one, three, five, seven and ten year periods. We are confident that
your shareholders would welcome our currency. In fact, 38 of your 50 largest
institutional shareholders also have significant investments in Comcast.
Our proposal is subject to the negotiation of a definitive merger agreement. We
are prepared to deliver a draft merger agreement as soon as you wish. We are
confident that the combination does not present any significant regulatory
issues.
In light of the significance of this proposal to both your shareholders and
ours, we are publicly releasing the text of this letter.
We hope that you will work with us to make this vision a reality.
Respectfully submitted,
Ralph J. Roberts Brian L. Roberts
Chairman of the Board President
***************
Financial Community Meeting
---------------------------
Comcast Corporation will host a meeting with the financial community on July 9,
2001 at 10:00 a.m. Eastern Daylight Time in New York. The meeting is being held
in the ballroom (20th floor) of the St. Regis Hotel, which is on 55th Street
between Madison and Fifth Avenues. The meeting will be broadcast live via the
Internet at www.cmcsk.com.
In addition, the meeting will be available via teleconference by dialing
888-754-3420 (international: 212-346-7476). A telephone replay will be available
beginning an hour following the meeting until July 16, 2001 at midnight Eastern
Daylight Time. To access the rebroadcast, please dial 800-633-8284
(international callers: 858-812-6440) and enter code 19308891. An audio
recording of the meeting will also be available on Comcast's website
(www.cmcsk.com) starting at 5:00 p.m. Eastern Daylight Time on July 9 and ending
at midnight Eastern Daylight Time on July 16, 2001.
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Press Conference Call
---------------------
Comcast Corporation will also host a press conference call on July 9, 2001 at
11:30 a.m. Eastern Daylight Time in New York. To participate in the
teleconference dial 888-732-8129 (international: 212-346-0261). A telephone
replay will be available beginning an hour following the call until July 16,
2001 at midnight Eastern Daylight Time. To access the rebroadcast, please dial
800-633-8284 (international callers: 858-812-6440) and enter code 19309191.
In addition, the teleconference will also be broadcast live via the Internet at
www.cmcsk.com. An audio recording of the call will be available on Comcast's
website (www.cmcsk.com) starting at 5:00 p.m. Eastern Daylight Time on July 9
ending at midnight Eastern Daylight Time on July 16, 2001.
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In some cases, you can
identify those so-called "forward-looking statements" by words such as "may,"
"will," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," or "continue," or the negative of those words and other
comparable words. Comcast Corporation ("Comcast") wishes to take advantage of
the "safe harbor" provided for by the Private Securities Litigation Reform Act
of 1995 and you are cautioned that actual events or results may differ
materially from the expectations expressed in such forward-looking statements as
a result of various factors, including risks and uncertainties, many of which
are beyond the control of Comcast. Factors that could cause actual results to
differ materially include, but are not limited to: (1) the businesses of Comcast
and AT&T Broadband may not be integrated successfully or such integration may be
more difficult, time-consuming or costly than expected; (2) expected combination
benefits from the transaction may not be fully realized or realized within the
expected time frame; (3) revenues following the transaction may be lower than
expected; (4) operating costs, customer loss and business disruption, including,
without limitation, difficulties in maintaining relationships with employees,
customers, clients or suppliers, may be greater than expected following the
transaction; (5) the regulatory approvals required for the transaction may not
be obtained on the proposed terms or on the anticipated schedule; (6) the
effects of legislative and regulatory changes; (7) the potential for increased
competition; (8) technological changes; (9) the need to generate substantial
growth in the subscriber base by successfully launching, marketing and providing
services in identified markets; (10) pricing pressures which could affect demand
for Comcast's services; (11) Comcast's ability to expand its distribution; (12)
changes in labor, programming, equipment and capital costs; (13) Comcast's
continued ability to create or acquire programming and products that customers
will find attractive; (14) future acquisitions, strategic partnerships and
divestitures; (15) general business and economic conditions; and (16) other
risks described from time to time in Comcast's periodic reports filed with the
Securities and Exchange Commission.
# # #
Investor Contact:
----------------
Marlene S. Dooner, Vice President, Investor Relations (215) 981-7392
William E. Dordelman, Vice President, Finance (215) 981-7550
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Kelley L. Claypool, Manager, Investor Relations (215) 981-7729
Media Contact:
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The Abernathy MacGregor Group (212) 371-5999
Adam Miller, Steve Frankel, Brian Faw
Note: The following notice is included to meet certain legal requirements:
ADDITIONAL INFORMATION
Subject to future developments, Comcast may file with the Commission (i)
a preliminary proxy statement for solicitation of proxies from the shareholders
of AT&T Corp. ("AT&T") in connection with AT&T's special meeting which is
scheduled to take place in September 2001 and (ii) a registration statement to
register the Comcast shares to be issued in the proposed transaction. Investors
and security holders are urged to read the proxy statement and registration
statement (when and if available) and any other relevant documents filed with
the Commission, as well as any amendments or supplements to those documents,
because they will contain important information. Investors and security holders
may obtain a free copy of the proxy statement and the registration statement
(when and if available) and other relevant documents at the Commission's
Internet web site at www.sec.gov. The proxy statement and registration statement
(when and if available) and such other documents may also be obtained free of
charge from Comcast by directing such request to: Comcast Corporation, 1500
Market Street, Philadelphia, Pennsylvania 19102-2148, Attention: General
Counsel.
INFORMATION REGARDING PARTICIPANTS
The following table sets forth the name and the title of persons who may
be deemed to be participants on behalf of Comcast in the solicitation of proxies
from the shareholders of AT&T.
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Name Title
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Ralph J. Roberts Chairman and Director
Julian A. Brodsky Vice Chairman and Director
Brian L. Roberts President and Director
S. Decker Anstrom Director
Sheldon M. Bonovitz Director
Joseph L. Castle II Director
Felix G. Rohatyn Director
Bernard C. Watson Director
Irving A. Wechsler Director
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Name Title
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Name Title
Anne Wexler Director
John R. Alchin Executive Vice President and
Treasurer
Stephen B. Burke Executive Vice President
Stanley L. Wang Executive Vice President - Law
and Administration and Secretary
Arthur R. Block Senior Vice President and
General Counsel
Karen Dougherty Buchholz Vice President - Corporate
Communications
Marlene S. Dooner Vice President - Investor
Relations
William E. Dordelman Vice President - Finance
Kenneth Mikalauskas Vice President - Finance
Kelley L. Claypool Manager - Investor Relations
As of the date of this filing, Comcast beneficially owns 83,514,401
shares of AT&T common stock and 4,813,230 shares of Class A Liberty Media Group
tracking stock.
As of the date of this filing, Ralph J. Roberts beneficially owns 81,144
shares of Class A Liberty Media Group tracking stock; Julian A. Brodsky
beneficially owns 20,900 shares of Class A Liberty Media Group tracking stock;
Brian L. Roberts beneficially owns 26,888 shares of Class A Liberty Media Group
tracking stock; Sheldon M. Bonovitz beneficially owns 8,656 shares of AT&T
common stock and 1,850 shares of Class A Liberty Media Group tracking stock;
Irving A. Wechsler beneficially owns 50,397 shares of AT&T common stock and
200,000 shares of Class A Liberty Media Group tracking stock; Anne Wexler
beneficially owns 1,414 shares of AT&T common stock; John R. Alchin beneficially
owns 1,738 shares of AT&T common stock and 456 shares of Class A Liberty Media
Group tracking stock; Stephen B. Burke beneficially owns 50,000 shares of Class
A Liberty Media Group tracking stock; Stanley L. Wang beneficially owns 1,131
shares of AT&T common stock and 4,000 shares of Class A Liberty Media Group
tracking stock; and Kenneth Mikalauskas beneficially owns 7 shares of AT&T
common stock.
In addition, Comcast has customary commercial relationships with Liberty
Media Group ("Liberty") and AT&T involving the distribution of cable television
programming. Comcast carries on its cable systems a number of programming
networks either owned by Liberty or in which Liberty has an interest, including
networks distributed by the Starz Encore Group, Discovery Communications and USA
Networks. Similarly, AT&T carries on its cable systems several programming
networks controlled by Comcast, including E! Entertainment and the Golf Channel.
Finally, QVC, which is owned 57% by Comcast and 43% by Liberty, is distributed
by both Comcast and AT&T, as well as by other major video programming
distributors.
Comcast also owns an 8.4% ownership interest in At Home Corporation, a
joint venture in which AT&T holds majority voting power and a large economic
stake, and distributes At Home Corporation's high-speed cable modem services on
its cable systems.
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OTHER PERSONS WHO MAY ALSO SOLICIT PROXIES
Comcast has retained Morgan Stanley & Co. Incorporated ("Morgan
Stanley") to act as a financial advisor in connection with the Comcast proposal.
Pursuant to a letter agreement between Morgan Stanley and Comcast, Comcast has
agreed to pay Morgan Stanley for its financial advisory services in connection
with the Comcast proposal a financial advisory fee of (1) $6,000,000 upon
execution of the letter agreement and (2) $34,000,000 upon the closing of a
business combination between Comcast and AT&T Broadband. Comcast has also agreed
to reimburse Morgan Stanley for fees of outside counsel incurred in connection
with Morgan Stanley's engagement by Comcast. In addition, Comcast has agreed to
indemnify Morgan Stanley and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of their engagement. Morgan Stanley does not admit that it or any of
its partners, directors, officers, employees, affiliates or controlling persons,
if any, is a "participant" as defined in Schedule 14A promulgated under the
Securities Exchange Act of 1934, as amended, in the solicitation of proxies, or
that Schedule 14A requires the disclosure of certain information concerning it
or them. The following table sets forth the name and the title of each of the
Morgan Stanley employees who may be deemed to be a participant on behalf of
Comcast in the solicitation of proxies from the shareholders of AT&T.
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Name Title
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Paul J. Taubman Managing Director
Andrew K. Woeber Vice President
As of the date of this filing, Andrew K. Woeber beneficially owned
approximately 100 shares of AT&T common stock.
Morgan Stanley's principal business address is 1585 Broadway, New York,
New York 10036. Morgan Stanley engages in a full range of investment banking,
securities trading, market- making and brokerage services for institutional and
individual clients. In the normal course of its business, Morgan Stanley may
trade the debt and equity securities of AT&T for its own account and for the
accounts of its customers, and, accordingly, may at any time hold a long or
short position in such securities. Morgan Stanley has informed Comcast that, as
of the close of business on July 5, 2001, Morgan Stanley, for its own account,
held a net long position of 917,475 shares of AT&T common stock and a net short
position of 9,193,775 shares of Class A Liberty Media Group tracking stock.
Morgan Stanley and certain of its affiliates also may have voting and
dispositive power with respect to certain shares of AT&T stock held in asset
management, brokerage and other accounts. Morgan Stanley and such affiliates
disclaim beneficial ownership of such shares of AT&T stock.
Comcast has also retained J.P. Morgan Securities Inc. ("JPMorgan") to
act as a financial advisor in connection with the Comcast proposal. Pursuant to
a letter agreement between JPMorgan and Comcast, Comcast has agreed to pay
JPMorgan for its financial advisory services in connection with the Comcast
proposal a financial advisory fee of (1) $5,250,000 upon execution of the letter
agreement and (2) $29,750,000 upon the closing of a business combination between
Comcast and AT&T Broadband. Comcast has also agreed to reimburse JPMorgan for
fees of outside counsel incurred in connection with JPMorgan's engagement by
Comcast. In
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addition, Comcast has agreed to indemnify JPMorgan and certain related persons
against certain liabilities, including certain liabilities under the federal
securities laws, arising out of their engagement. JPMorgan does not admit that
it or any of its partners, directors, officers, employees, affiliates or
controlling persons, if any, is a "participant" as defined in Schedule 14A
promulgated under the Securities Exchange Act of 1934, as amended, in the
solicitation of proxies, or that Schedule 14A requires the disclosure of certain
information concerning it or them. The following table sets forth the name and
the title of each of the JPMorgan employees who may be deemed to be a
participant on behalf of Comcast in the solicitation of proxies from the
shareholders of AT&T.
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Name Title
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Robert Kindler Managing Director
William Cohan Managing Director
Julie Richardson Managing Director
William Bundy Vice President
As of the date of this filing, William Cohan beneficially owned
approximately 500 shares of AT&T common stock.
JPMorgan's principal business address is 270 Park Avenue, New York, New
York 10017. JPMorgan engages in a full range of investment banking, securities
trading, market-making and brokerage services for institutional and individual
clients. In the normal course of its business, JPMorgan may trade the debt and
equity securities of AT&T for its own account and for the accounts of its
customers, and, accordingly, may at any time hold a long or short position in
such securities. JPMorgan has informed Comcast that, as of the close of business
on July 3, 2001, JPMorgan, for its own account, held a net long position of
461,500 shares of AT&T common stock and options to acquire 7,526,500 shares of
AT&T common stock. JPMorgan and certain of its affiliates also may have voting
and dispositive power with respect to certain shares of AT&T stock held in asset
management, brokerage and other accounts. JPMorgan and such affiliates disclaim
beneficial ownership of such shares of AT&T stock.
Comcast has also retained Merrill Lynch & Co. ("Merrill Lynch") to act
as a financial advisor in connection with the Comcast proposal. Pursuant to a
letter agreement between Merrill Lynch and Comcast, Comcast has agreed to pay
Merrill Lynch for its financial advisory services in connection with the Comcast
proposal a financial advisory fee of (1) $5,250,000 upon execution of the letter
agreement and (2) $29,750,000 upon the closing of a business combination between
Comcast and AT&T Broadband. Comcast has also agreed to reimburse Merrill Lynch
for fees of outside counsel incurred in connection with Merrill Lynch's
engagement by Comcast. In addition, Comcast has agreed to indemnify Merrill
Lynch and certain related persons against certain liabilities, including certain
liabilities under the federal securities laws, arising out of their engagement.
Merrill Lynch does not admit that it or any of its partners, directors,
officers, employees, affiliates or controlling persons, if any, is a
"participant" as defined in Schedule 14A promulgated under the Securities
Exchange Act of 1934, as amended, in the solicitation of proxies, or that
Schedule 14A requires the disclosure of certain information concerning it or
them. The following table sets forth the name and the title of each of the
Merrill Lynch
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employees who may be deemed to be a participant on behalf of Comcast in the
solicitation of proxies from the shareholders of AT&T.
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Name Title
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John Trousdale Managing Director
Gregg Seibert Managing Director
James Ratigan Director
Ben Braun Vice President
As of the date of this filing, Gregg Seibert beneficially owned 26,740
shares of Class A Liberty Media Group tracking stock.
Merrill Lynch's principal business address is 4 World Financial Center,
New York, New York 10080. Merrill Lynch engages in a full range of investment
banking, securities trading, market-making and brokerage services for
institutional and individual clients. In the normal course of its business,
Merrill Lynch may trade the debt and equity securities of AT&T for its own
account and for the accounts of its customers, and, accordingly, may at any time
hold a long or short position in such securities. Merrill Lynch has informed
Comcast that, as of the close of business on July 6, 2001, Merrill Lynch, for
its own account, held a net long position of 20,864 shares of AT&T common stock.
Merrill Lynch and certain of its affiliates also may have voting and dispositive
power with respect to certain shares of AT&T stock held in asset management,
brokerage and other accounts. Merrill Lynch and such affiliates disclaim
beneficial ownership of such shares of AT&T stock.
Comcast has also retained Quadrangle Group LLC ("Quadrangle") to act as
a financial advisor in connection with the Comcast proposal. Comcast has agreed
to indemnify Quadrangle and certain related persons against certain liabilities,
including certain liabilities under the federal securities laws, arising out of
their engagement. Quadrangle does not admit that it or any of its partners,
directors, officers, employees, affiliates or controlling persons, if any, is a
"participant" as defined in Schedule 14A promulgated under the Securities
Exchange Act of 1934, as amended, in the solicitation of proxies, or that
Schedule 14A requires the disclosure of certain information concerning it or
them. The following table sets forth the name and the title of each of the
Quadrangle employees who may be deemed to be a participant on behalf of Comcast
in the solicitation of proxies from the shareholders of AT&T.
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Name Title
--------------------------------------------------------------------------------
Steven Rattner Managing Principal
Peter R. Ezersky Managing Principal
Quadrangle's principal business address is 30 Rockefeller Plaza, 31st
Floor, New York, New York 10020. Quadrangle has informed Comcast that, as of the
close of business on July 3, 2001, Quadrangle held no shares of AT&T stock for
its own account.
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Other than as set forth herein, as of the date of this filing, neither
Comcast nor any of the other participants listed above has any substantial
interest, direct or indirect, by security holdings or otherwise, in AT&T.
12