Comcast Corp. and Prime Communications LLC, two national cable television companies with large holdings in Maryland, announced a strategic agreement yesterday that could lead to Comcast's purchase of Prime for an estimated $1.45 billion.
Under the terms of the deal, Comcast will help develop new high-speed data and telephone services along Prime's cable network, and will lend Prime approximately $735 million to carry out the plan.
In return, Comcast will receive a convertible note giving it the right to take over 90 percent of Prime. The note cannot be converted until the buildup of Prime's networks in Maryland and Northern Virginia is completed, which is expected to happen by July 2002. In addition, Comcast will need to secure the approval of Prime's local franchising authorities.
Until the conversion, Prime will be responsible for the management and operation of its current network. The loan transaction is expected to close in the third quarter of 1999. Privately owned Prime, based in Austin, Texas, has 230,000 cable subscribers in Montgomery County. Philadelphia-based Comcast has 300,000 subscribers in Harford, Howard and Baltimore counties, as well as 26,500 customers on the Eastern Shore and in Delaware.
Comcast has already announced that it will buy a controlling interest in another Washington-area cable company, Jones Intercable Inc. Once all of Comcast's pending acquisitions close, it will be the biggest cable operator in the Baltimore-Washington area.
Marlene Dooner, Comcast's senior director of investor relations, said the Prime transaction "provides a terrific opportunity in the future to deliver Comcast services to a growing market."
Comcast has been among the earliest cable companies to roll out high-speed cable Internet access, and Prime hopes to draw on that experience.
"We certainly believe this is going to have a positive impact on our customers, especially as different technologies roll out," Prime Vice President Jerry Lambert said.
The complex deal between Comcast and Prime also involves cable systems in the Chicago area.
Comcast plans to acquire an option for Prime's interest in Chicago networks, an option that may be exercised as soon as October 1999. Comcast will pay Prime an additional $25 million for this early right to take over the Chicago networks.
Along with the payments for the Baltimore-Washington and RTC Chicago systems, Comcast would purchase a $50 million subordinated note and an $80 million stake in the remaining 10 percent of Prime, and take on $560 million in Prime debt.
Pub Date: 12/12/98