<BREAKFAST WITH THE FOOL>
Friday, April 23, 1999
"I can usually judge a fellow by what he laughs at." -- Wilson Mizner
AT&T Woos MediaOne
About a month after cable TV operator MediaOne Group (NYSE: UMG) agreed to be acquired by rival Comcast Corp. (Nasdaq: CMCSK), AT&T (NYSE: T) made an unsolicited counter-offer yesterday to buy MediaOne for $58 billion, or $87.375 per share -- $30.85 in cash and 0.95 of an AT&T share -- based on AT&T's close yesterday of $59.50. AT&T would also assume $4.5 billion in debt and preferred equity.
The offer represents a 26% premium over MediaOne's close yesterday of $69.50 and is 17.5% higher than the value of Comcast's bid as of yesterday's close. Comcast offered to give MediaOne shareholders 1.1 Comcast Class A shares for each MediaOne share. That's worth $74.39 a share, as of yesterday. When Comcast made the offer, the all-stock deal valued MediaOne at $80.16 a share, which, at the time, represented a 32% premium over MediaOne's then market price of $60.75.
To offset a possible decline in its share price, AT&T threw in a provision to pay more in cash to cover up to a 10% drop in price from its close Wednesday of $57 a share. The provision ensures an offer of $85 a share if AT&T trades between $57 and $51.30 a share. There's no upper limit on the value of the deal should AT&T stock go up. What's more, the shares AT&T has put on the table come with full voting rights and pay a cash dividend, while the shares Comcast has offered to issue do not.
Having just recently completed its acquisition of Tele-Communications Inc. (TCI), AT&T is looking to further expand its cable platform, from which it can offer local phone service. AT&T expects at least $175 million to $200 million in savings from combining the former TCI operations with MediaOne. If the deal goes through, AT&T would own and operate cable systems in 26.5 million U.S. households.
News to Go
Cable TV operator Cox Communications (NYSE: COX) announced it will buy cable systems serving more than 260,000 customers in Fairfax County and Fredericksburg, Virginia, from Media General (AMEX: MEG.A) for $1.4 billion in cash. Cox expects to close the deal late this year.
Earnings to Go:
(Quarterly earnings per share versus that of the same year-earlier quarter and compared with analysts' mean estimate according to First Call. Where noted, earnings exclude one-time charges and gains.)
Albany International (NYSE: AIN) -- Q1 EPS: $0.38 vs. $0.35 last year; estimate: $0.34
American Power Conversion (Nasdaq: APCC) -- Q1 EPS: $0.36 vs. $0.28 last year; estimate: $0.32
Dollar Tree Stores (Nasdaq: DLTR) -- Q1 EPS: $0.16 vs. $0.12 last year; estimate: $0.14
Fore Systems (Nasdaq: FORE) -- fiscal Q4 EPS: $0.12 vs. $0.13 last year; estimate: $0.11
Gateway (NYSE: GTW) -- Q1 EPS: $0.62 vs. $0.48 last year; estimate: $0.60
Level 3 Communications (Nasdaq: LVLT) -- Q1 EPS: loss of $0.33 vs. loss of $0.02 last year; estimate: loss of $0.37
Merck (NYSE: MRK) -- Q1 EPS: $0.54 vs. $0.47 last year; estimate: $0.54
Pixar (Nasdaq: PIXR) -- Q1 EPS: $0.02 vs. $0.08 last year; estimate: breakeven
Starbucks (Nasdaq: SBUX) -- fiscal Q2 EPS: $0.10 vs. $0.08 last year; estimate: $0.10
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