Source: Time Warner, Comcast Offer $18B for Adelphia

NEW YORK – Media group Time Warner Inc. (TWX) and top U.S. cable TV operator Comcast Corp. (CMCSA) are set to pay $18 billion for bankrupt cable operator Adelphia Communications Corp. (search), one source familiar with the matter said.

The tentative deal, in cash and stock warrants, appears to beat off a potential rival bid by cable firm Cablevision Systems Corp. (CVC), which a separate source has said was preparing a $16.5 billion cash bid for Adelphia.

Time Warner and Comcast have long been viewed as the likely winners for Adelphia's 5 million-plus subscribers. The deal comes as cable industry players race to offer television, high-speed Internet and telephone services to customers, fighting pressure from satellite and telecommunications rivals.

Time Warner and Comcast will pay Adelphia bondholders about $13.5 billion in cash and about $4.5 billion in warrants for stock in a new company formed by combining Time Warner's cable business and Adelphia, the New York Times reported, citing an executive involved in the discussions.

Spokesmen for Time Warner, Comcast and Adelphia declined to comment on the deal.

The deal, finalized late on Thursday after several days of frenzied activity, was for a slightly higher price than originally envisaged, one source familiar with the situation said. Earlier speculation over Cablevision's involvement delayed the closing of a deal past Adelphia's original target date of March 31.

Investors lost billions of dollars when Adelphia collapsed in 2002 amid claims that the company's founding Rigas family siphoned millions of dollars of Adelphia funds for personal use and misrepresented its financial condition.

The scandal forced Adelphia to seek Chapter 11 bankruptcy protection in 2002. Last summer John Rigas (search), Adelphia's founder, and his son Timothy, Adelphia's former chief financial officer, were convicted of fraud and conspiracy. They are awaiting sentencing.

Adelphia is expected to pay about $725 million to U.S. authorities to settle claims stemming from the accounting and management scandal, sources close to the situation have said.