Financial Instruments and Markets: A Casebook

22

Cox Communications, Inc., 1999

Summer in Atlanta, Georgia, 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 treasurers) anticipated that Cox would be making several major acquisitions over the next three to five 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 eight states. These deals would put stress on the firm's complicated balance sheet, requiring Clement's team to scramble to fund several years' of acquisitions in little more than six 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 100-year-old newspaper companies that had branched out into other communications businesses, including ...