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News > Deals
Cox in AT&T cable talks
August 28, 2001: 1:46 p.m. ET

Cox Communications only one to sign agreement; Comcast still refuses
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NEW YORK (CNNfn) - Cox Communications, the nation's fifth-largest cable television firm, has emerged from the wings as an unexpected contender for AT&T's cable unit, according to a published report Tuesday.

Speculation has swirled since July about who is likely to acquire AT&T Broadband, especially after AT&T Corp.'s board unanimously rejected Comcast's (CMCSK: down $0.85 to $36.90, Research, Estimates) unsolicited $44.5 billion offer for the cable unit, opening the door to other potential bids.

Since then, New York-based AT&T has entertained increasing interest from various companies, including AOL Time Warner Inc. (AOL: down $0.78 to $40.87, Research, Estimates), and Walt Disney Corp. (DIS: down $0.57 to $25.83, Research, Estimates).

But industry watchers discounted Cox Communications' (COX: down $1.39 to $39.98, Research, Estimates) ability to present a viable challenge in the high-stakes bidding, the Wall Street Journal said, although they now appear to have revised their opinion.

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Cox has held extensive preliminary talks with AT&T Corp. about a possible pairing, and has entered into a confidentiality agreement with AT&T to swap detailed financial information, the paper said, citing people familiar with the situation.

An AT&T spokeswoman said the No.1 U.S. phone provider is in talks with firms that have expressed an interest in the broadband business. However, she declined to comment on the specific parties involved. Cox declined comment.

News of the discussions caused Cox shares to shed nearly 4 percent in afternoon trading while AT&T remained unaffected.

Analysts argue about whether Cox ultimately has the financial strength to follow through with the deal, contending that Comcast still appears to be the most logical winner, with a much larger market capitalization than Cox, the report said. Also, the deal would require the Cox family to dilute its stake to a minority position in the combined entity.

But Cox's discussions with AT&T (T: up $0.14 to $19.20, Research, Estimates)  could give it more leverage for an eventual side-deal with Comcast, the paper said.

If the two companies combine forces, they would control more than 20 million cable subscribers, catapulting Cox to the No. 1 spot in the cable-TV business, the paper said.

A Cox buy?

A purchase for Cox hinges largely on whether the Cox family would relinquish control, said analyst David Goldsmith of Buckingham Research Group. The Cox family has a 65 percent economic stake and 77 percent voting control of Cox Communications.

A deal for AT&T broadband would push the Cox family ownership stake to less than 30 percent, the WSJ said.

"AT&T shareholders would have majority interest and the Cox family would have the largest block of stock. But would they want to give up absolute control?" Goldsmith said.

AT&T has apparently held meetings with Microsoft and Disney as potential suitors for its cable TV business. AOL Time Warner, the parent of CNNfn.com, has also reportedly been in discussions.

But only Cox has sign the AT&T confidentiality agreement. Comcast, which was rejected in its $44.5 billion bid, still refuses to sign the accord, a person familiar with the situation said.

A confidentiality agreement, typical in an auction process, prevents a bidder from discussing AT&T's financial information. But a condition contained in the agreement, the "standstill," is blocking negotiations with Comcast. The "standstill" prevents a would-be acquirer – in this case, Comcast – from attempting a hostile bid if it is rejected.

However, it is unclear whether the agreement signed by Cox contains the same standstill.

Comcast declined to comment. graphic

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.