Cox Communcation

Cox Communications, Inc. (1999).

Summer in Atlanta, home of Cox Communications, Inc. (Cox), was usually quite warm, but the summer of 1999 was especially hot for Dallas Clement, Cox’s 34 year old treasurer. At the beginning of 1999, Clement and his team (Susan Coker and Mark Major, co-assistant treasures) anticipated that Cox would be making several major acquisitions over the next 3 – 5 years, probably spending $7-$8 billion in the process.

However, unexpectedly aggressive competition by rivals seeking to lock up valuable cable systems had brought a number of important properties into play sooner than expected. From a strategic viewpoint, Cox could not afford to lose these cable properties, especially those that could be combined with its existing systems to yield substantial market presence and attendant cost savings. By the beginning of July, the firm had already committed to over $7 billion in acquisitions to be completed by the end of the year, which would add over 1.6 million new subscribers in 8 states. These deals would put stress on Cox’s complicated balance sheet, requiring Clement’s team to scramble to fund several years’ of acquisitions in little more than 6 months.

Then, in mid-July, Cox learned that Gannett Co. would put its cable properties up for sale. Cox’s parent, Cox Enterprises, Inc. (“CEI”), and Gannett were both approximately 1000 year-old newspaper companies that had branched out into other communications businesses, including television and radio broadcasting, print media, production and cable. There had been little indication that Gannett would sell its cable system, but the high prices being paid for cable subscribers apparently convinced Gannett to part with its cable assets. The Cox team estimated that, based on comparable recent transactions, Cox would need to bid about $2.7 billion to win the right to serve Gannett’s 532,000 customers. With this acquisition and the others to which it had recently committed, Cox’s...