Adelphia Communications said Friday it will acquire Century Communications for $5.2 billion, its second large purchase in the past month, creating the fifth-largest cable operator in the United States.
Under the agreement, each share of Century's class A stock will be exchanged for $9.16 in cash and 0.6122 shares of Adelphia stock. That would value Century at $44.14 a share based on Adelphia's closing price of 57 1/8 on Thursday.
Each share of Century's Class B common stock will be exchanged for $11.81 in cash and 0.6360 shares of Adelphia stock. That would value each class B share at $48.14. Adelphia will issue a a total of 48.7 million shares.
Included in the $5.2 billion price tag is the assumption of $1.6 billion in Century debt.
Shares of Adelphia (ADLAC) fell 1 5/8 to 55 1/2, while Century (CTYA) class A shares jumped 2 5/8 to 38.
"With the acquisition of Century, Adelphia's annual revenues will exceed $2 billion and we will serve nearly 5 million customers," said John Rigas, chief executive of Adelphia. "This transaction strengthens the company financially and adds significant talent to our management team. Adelphia's and Century's similar histories and cultures will facilitate a rapid and smooth integration of our operations."
Century, which is based in New Canaan, Conn., and operates cable TV systems in California, Colorado and Puerto Rico, announced last December that it was exploring "strategic alternatives," in an effort to bolster shareholder value. Many had expected the company to be sold.
Adelphia operates mostly on the whole Eastern Seaboard and the Midwest. The acquisition of Century gives it a strong foothold in the West.
A few weeks ago, Adelphia said it would buy FrontierVision Partners LP for about $1 billion. The two deals would boost Adelphia's subscriber base to 4.7 million.
The company is branching out into cable phone and high-speed access services - it owns owns nearly three-quarters of local phone carrier Hyperion Communications (HYPT) - and needs to spend hoards of cash to upgrade its networks.
Demand for such services is triggering a wave of consolidation in the cable industry. The acquisitions will boost Adelphia's cash flow and help pay for its network improvements.
Rigas and his family own 65 percent of Adelphia.
Written By Jeffry Bartash, CBS MarketWatch