Adelphia Auction Attracts 2 Major Bids

With offers due Monday, two rival bidders have entered the hunt for all of Adelphia Communications Corp., the cable company that has been operating under Chapter 11 bankruptcy protection since mid-2002.

Kohlberg Kravis Roberts & Co. and Providence Equity Partners submitted a last-minute offer for the nation’s fifth-largest cable company and the biggest operating in Southern California, sources said. That pits the two private equity firms against a joint offer by Time Warner Inc. and Comcast Corp.

Adelphia’s creditors, who are owed about $20 billion, set an asking price for the company of $17.5 billion. Sources said both bids were below that amount. The Time Warner-Comcast offer, they said, is worth about $17 billion and the bid submitted by the two private equity firms is between $15 billion and $16 billion.

Analysts said bidders with cable holdings could justify paying a higher price because of the savings they could achieve by eliminating redundancies in overhead and extracting volume discounts from programmers and other suppliers.

None of the parties would comment Monday, but Adelphia insiders said they expected the auction to take weeks to complete.

The bidding is complicated by the fact that Adelphia broke the company into seven clusters to enable small entities to bid on one or more pieces.

As a result, in addition to the two huge bids for the entire company, sources said, smaller bids were continuing to come in Monday evening, nearly a dozen in all. Analysts said that instead of selling the entire company, Adelphia could sell off some pieces and emerge from bankruptcy protection as an independent company.

They peg Adelphia’s worth at between $14 billion and $15 billion based on the quality of its cable systems and the cash flow it generates. They estimated that $6 billion in net operating loss carry forwards are worth an additional $1 billion to $2 billion. These could be valuable to any buyer looking to offset income and reduce its tax burden.

Adelphia filed for protection from creditors in June 2002, after the ouster of founder John Rigas amid an accounting scandal.

The 80-year-old executive and his son Timothy were convicted last July of looting the firm and cheating investors out of billions of dollars. They await sentencing.