Filed by Comcast Corporation Pursuant to
Rule 425 under the Securities Act of
1933 and deemed filed pursuant to Rule
14a-12 under the Securities Exchange Act
of 1934
Subject Company: AT&T Corp.
Commission File No. 1-1105
Date: July 9, 2001
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).
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."
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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.
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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 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.
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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.
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
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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
Kelley L. Claypool, Manager, Investor Relations (215) 981-7729
Media Contact:
-------------
The Abernathy MacGregor Group (212) 371-5999
Adam Miller, Steve Frankel, Brian Faw
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Note: The following notice is included to meet certain legal requirements:
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.
Comcast, its directors and certain other Comcast employees and
advisors may be deemed to be "participants" in Comcast's solicitation of
proxies from AT&T's shareholders. A detailed list of the names, affiliations
and interests of the participants in the solicitation is contained in a filing
made by Comcast with the Commission pursuant to Rule 14a-12 on July 9, 2001.
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