Century Agrees to Be Sold to Cable Firm on East Coast

Century Communications Corp., the largest cable operator in Los Angeles, has agreed to be acquired by a fast-growing Pennsylvania company that is expected to accelerate the roll-out here of advanced services over cable lines.

Adelphia Communications Corp., a family-owned company in Coudersport, Pa., agreed Friday to buy Century in a stock and cash transaction valued at $3.36 billion, in addition to assuming $1.6 billion in debt.

The Century sale would be one of the richest in cable history. Cable values have soared in the last year, as new services have been introduced that could vastly increase revenues and give the industry a leg up in warding off rivals such as phone companies and satellite TV providers.

With the Century acquisition and several others in recent months, Adelphia would rise from the nation’s seventh-largest cable operator to the fifth-largest, with 5 million customers. If shareholders and regulators approve the deal, Adelphia, a newcomer to the Southern California market, would have its biggest concentration of subscribers in L.A.

Century serves about 800,000 customers in some of the most desirable neighborhoods in Los Angeles--from Eagle Rock west to Pacific Palisades and south to Redondo Beach and Orange County. Its remaining 800,000 customers are concentrated in Colorado Springs, Colo., and San Juan, Puerto Rico, with a smattering on the East Coast, where most of Adelphia’s operations are based.

Century officials said Adelphia would accelerate the roll-out of advanced services. “Their timetable . . . has been more aggressive than ours,” said Bernard Gallagher, president and chief operating officer of Century, who will serve on the Adelphia board with two other of Century’s top management after the deal closes.

He said there would be no layoffs as a result of the takeover, except those stemming from shutting down Century’s corporate headquarters in New Canaan, Conn.

Century had been planning to introduce new services this summer in Santa Monica, Redondo Beach, Beverly Hills and West Hollywood.

But the company has the worst service record of any cable operator in Los Angeles, according to local cable regulators, and has been slow to invest in equipment needed to upgrade their systems to deliver these advanced services. They said they would probably force Adelphia to upgrade Century’s facilities as a requirement for approving the deal.

Analysts said the company already is delivering telephone, high-speed modems and digital services in some markets, which include portions of New England, Ohio, Florida and western New York.

Adelphia officials did not return calls for comment.

Adelphia’s victory caught many in the industry off-guard not only because of the extravagant price but also because it would fail to gain operating efficiencies via the merger. Adelphia is paying a premium slightly lower than AT&T; Corp.’s purchase of the nation’s second-largest operator, Tele-Communications Inc., but higher than those paid by computer billionaire Paul Allen, one of the biggest spenders on cable, who was runner-up in the bidding war for Century.

Los Angeles, with more than 25 operators, is the last large city that has not concentrated cable into the hands of one or two dominant players.

The betting was on a purchase by TCI, which owns 25% of a cable partnership with Century in Los Angeles; MediaOne Group, the second-largest operator in the region, with 500,000 customers; or Paul Allen, whose offer to buy Century last August for a price in the mid-$35-a-share range was rejected by its founder and controlling shareholder, 70-year-old Leonard Tow.

During the last year, Allen has heavily invested in Los Angeles, accumulating about 560,000 subscribers in Southern California through his Charter Communications.

Charter made an all-cash bid that sources say came in well below Adelphia’s. Tow was less interested in taking his payment in cash than in stock to avoid a huge tax bill.

Under Friday’s transaction, Century’s Class A shareholders will receive $9.16 in cash and 0.6122 share of Adelphia stock for each of their shares, a value of $44.14 per share. Class B shareholders will get a value of $48.14. Analysts calculated that Adelphia is paying a multiple of 15 to 16 times cash flow. Allen, who can afford to pay higher prices because he can exploit losses provided by cable companies to offset his income, has paid multiples of 11 to 14 times cash flow.

Adelphia shares fell $2.63 to close at $54.50 on Nasdaq. Century shares rose $3.63 to $39, also on Nasdaq.

Century is Adelphia’s fourth acquisition in recent months. In late February, Adelphia, which is run by John Rigas, 74, and his three sons, agreed to buy FrontierVision Partners for $2.1 billion.

John Rigas, who founded the company in 1952 with his brother Gus, also bought into professional sports last year, following the lead of cable operators that see such programming as giving them a competitive edge. Adelphia, which controls a big cable system in Buffalo, N.Y., bought National Hockey League’s Buffalo Sabres.