Malone Sees Threat to AT&T;’s Acquisition of TCI

Tele-Communications Inc. Chairman John Malone conceded that the sharp drop in AT&T; Corp.’s stock price could kill the telephone company’s $44-billion acquisition of his cable television company.

A published report Monday quoted Malone as saying he was worried that AT&T; shareholders might reject the takeover because of the deal’s complexity and a dilution in the value of their holdings.

“It scares me to death to see their stock going down,” Malone told Broadcasting & Cable, a trade publication. “Scares me to death because I think it could well kill the deal.”

A TCI spokesperson said that Malone, whose company would receive $1.75 billion from AT&T; if shareholders reject the deal, remains solidly behind the deal and that his interview with the magazine was nearly two weeks ago. While AT&T;’s stock has dropped about 13% since the deal was announced June 24, it has stabilized in the last week, and even made a slight gain before dropping 25 cents Monday, to $56.75 a share on the New York Stock Exchange.

The partners have been selling the deal hard in the last two weeks in an attempt to reverse the negative reaction.

AT&T; is paying mostly newly issued stock to TCI shareholders.

Responding to speculation that terms of the deal may need to be renegotiated to get shareholder approval, AT&T; Chairman Michael Armstrong testified before Congress last week that the deal will not be re-priced.

In the interview, Malone said he thought Wall Street would come around to the transaction after certain details were disclosed, including the structure of a tracking stock to follow the performance of AT&T;’s new residential cable and telephone division.

“It was a mistake not to have fully worked out the details of the tracking stock so it could be disclosed at the same time” as the deal’s announcement, Malone told the publication.

“I think you’ll see this thing turn around and become very positive.”

Leo Hindery, president of TCI, told The Times in early July that AT&T; would probably insulate its shareholders from the impact of the investment in TCI’s riskier cable business by taking less than a controlling interest in the new tracking stock.