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Presentation
Prepared By: Group 56
Name Roll
Serial No.
01. Israt Jahan Ananna 20-306
The company incorporated in 1972 under the name “Adelphia,” from the Greek word for
“brothers.” The little group of five small-town cable systems grew slowly but steadily through the
1970s, but things changed once Rigas’s three sons, Michael, Tim, and James, joined the company in
the early 1980s.
In 1985, Adelphia more than doubled its subscriber base to 122,500 by acquiring a cable system in
Ocean County, NJ. The following year, Tim and James persuaded their father to take the company
public.
Adelphia went public with a dual-class structure that gave its founding family effective control of
the company and the board of directors.
In 1996, Adelphia’s subscriber base exceeded one million for the first time, but the really fast
growth was yet to come.
In 1999, at the height of the boom, Adelphia made three large cable-system acquisitions in a single
month
Analysis of the Economy
In USA Cable television started in the late 1940s, soon after television (TV) broadcasting
itself began growing into a mass market.
In the mid-1960s, regulatory hurdles imposed by the Federal Communications
Commission (FCC) in response to pressures from movie theater owners and TV
broadcasters, the cable industry’s growth accelerated.
In 1975, over three thousand cable TV franchises had been awarded across the country. In
the 1990s, further deregulation permitted cable operators and telephone companies to
enter each other’s businesses and offer bundled services to their customers.
The economy of US growing at 3% which play role in cable cand television industry.
Deregulations increased competition from direct broadcast satellites (DBS) and other
technological innovations such as the internet, fiber optics, and wireless communications,
drove further consolidation in the cable industry
Analysis of the Industry
Porter’s 5 Forces
Threat of new
entrants
High
Bargaining Threat of
power of buyers substitute
products
High
Moderate
Analysis of the Industry
PESTEL Analysis
Opportunities Threats
Accelerated technological innovations and advances
Opportunities in Online Space Competitors catching up with the
Customer preferences are fast changing product development
The emergence of new market segments The changing regulatory framework
and introduction of new stricter
regulations
High Debt Portion in capital
structure
Analysis of Adelphia Communications Corp:
Ratio Analysis
Liquidity Ratios 2001 2002 2003 2004
Current ratio 0.02 0.66 0.52 0.29
Cash ratio 0.01 0.3 0.25 0.18
Profitability Ratios 2001 2002 2003 2004
Gross Profit Margin 97.0% 103.1%
Operating Profit Margin -159.6% -145.3% -4.16% -3.98%
Leverage Ratios 2001 2002 2003 2004
Long term debt ratio 1.085 0.054 0.077 0.145
Interest Coverage Ratio 4.14 6.26
Leverage Ratios 2001 2002 2003 2004
Long term debt ratio 1.085 0.054 0.077 0.145
Interest Coverage Ratio 4.14 6.26
Analysis of Adelphia Communications Corp: Ratio
Analysis
Liquidity Ratio Profitability Ratio
0.660882532
0.969624636 1.030901431
0.523868837
Current ratio Cash ratio Gross Profit Margin Operating Profit Margin
Analysis of Adelphia Communications Corp: Ratio
Analysis
Du-Pont Analysis
1.3709010
Average 25
Optimum Debt-
Alternative Equity
Courses of Action
Stand Alone
Debt-Equity Swap
TWC
Bidding Process
Others
WACC Calculation
Particulars Amount
Depreciation as a % of 0.26076
revenue
Amortization as a % of 0.07326
revenue
Capital Expenditure as a % 0.731753
of Revenue
Alternative 1: Liquidation
Adelphia’s Hypothetical Liquidation Valuation and Allocation to Liabilities
Mohammad Hossain
ID: 20-373
Alternative 2: Stand-alone
(i) Private Placement of Equity.
Enterprise Value $2789 million
Number of Shares 605.7
Value Per Share $4.60
Assumptions
WACC 19.13%
Growth rate .04%
Distress Cost 40%
Probability of Distress 50 %
Alternative 2: Stand-alone
(i) Private Placement of Equity.
Assumptions
WACC 13%
Growth rate .03%
Distress Cost 70%
Probability of Distress 75 %
Alternative 2: Stand-alone
(ii)Optimum Debt-Equity
Forecast: Value Per Share
Statistic Forecast values
Trials 10,000
Base Case 4.73
Mean 5.09
Median 4.74
Mode '---
Standard Deviation 12.28
Variance 150.92
Skewness 0.1484
Kurtosis 3.24
Coeff. of Variation 2.41
Minimum -42.18
Maximum 59.53
Mean Std. Error 0.12
Now presenting...
Enterprise Value
$109242.4 million
Number of Shares 21731
Value Per Share $5.02
Assumptions
WACC 13%
Growth rate .04%
Distress Cost 30%
Probability of Distress 50 %
Alternative 2: Stand-alone
(iii)Debt-Equity Swap
Forecast: Value Per Share (SWAP)
Statistic Forecast values
Trials 10,000
Base Case 5.03
Mean 5.09
Median 5.03
Mode '---
Standard Deviation 0.66
Variance 0.43
Skewness 0.6397
Kurtosis 3.75
Coeff. of Variation 0.1291
Minimum 3.35
Maximum 8.48
Mean Std. Error 0.01
Alternative 3: Bidding Offer
(i)TWC
Enterprise Value
$109242.4 million
Number of Shares 21731
Value Per Share $5.02
Assumptions
WACC 19.24%
Growth rate .07%
Distress Cost 30%
Probability of Distress 55%
Alternative 3: Bidding Offer
(i)TWC
Forecast: Value Per Share
Statistic Forecast values
Trials 2,000
Base Case 7.93
Mean 8.32
Median 7.92
Mode '---
Standard Deviation 5.66
Variance 32.06
Skewness 0.4521
Kurtosis 3.49
Coeff. of Variation 0.4809
Minimum -6.86
Maximum 35.18
Mean Std. Error 0.13
Alternative 3: Bidding Offer
(ii) Others
Liquidation $0.66
Reorganization under chapter 11 through
Debt to Equity swap.
Justification
Preference by creditors.
How serious was cablevisions last minute Cable Vision’s offer dominates other offers.
offers? Because it bids more cash offer than TWC
and other companies. But the company
offers less amount of cash than the
demand of the creditors of Adelphia.
What will be the traditional stand- Debt-equity swap will be the stand-
alone reorganization plan? alone reorganization plan. Creditors will
get per share at the offer price of $.0.80
that is worth of $5.03 value per share.
What would be the impact on bidding Adelphia will have to pay the break up fee
process? $440 million as the company wants to get
out from the auction.
THANK YOU