1. Cox Communications is considering acquiring Gannett for $2.7 billion to expand its customer base and achieve economies of scale. 2. If the acquisition is completed, Cox's short-term (1.5 years) funding need is estimated to be $3.03 billion, with $1.5 billion needing to be met through external financing. Its long-term (4.5 years) funding need is estimated to be $6.77 billion, with $6.77 billion needing external financing. 3. The key constraints Mr. Clement faces in satisfying Cox's funding needs are maintaining Cox Enterprises' 65% minimum economic stake and managing Cox's debt levels to maintain investment grade credit ratings.

1. Cox Communications

2. Cox Communications

6. Cox Communications at a Glance
• Nation's 3rd largest cable telecommunications provider
– 6 million total residential and commercial customers
– 2+ million residential telephone
customers
– 22,000 employees
– $8 billion revenue
• Leading provider of video, voice
and high-speed Internet
• Recent entry into wireless markets
• Cox Business Services
– Complete suite of communications solutions for businesses

7. Cox Digital Telephone
• Cox pioneered cable telephone in 1997
– Circuit switched, and now IP-based service
• Carrier class: quality and reliability
– 10 JD Powers & Associates awards companywide, 6 in the Western
Region
• Bundled Service Integration – where we are headed:
– Phone Tools (Web portal management)
– Voicemails to your email
– Remote DVR control from your cell phone
– Caller-ID on TV
“Reliable, affordable communications,
at home or on the go”

8. Strategy COX @ 1999
•ขยายฐานลูกค้าใน
ระบบเคเบิ้ล และระบบ
communication
•Economy of scale
•ต้องการเป็นผู้นำา

9. ประวัติของ Gannett Co.
• Grannett จัดตั้งขึ้นในปี 1906 โดย Frank
E.Grannett เป็นบริษัทสื่อสารที่มีเครือข่าย
หนังสือพิมพ์ในสังกัดกว่า 75 ฉบับ (รวมไปถึง
USA Today หนังสือพิมพ์ที่ขายดีที่สุดใน
อเมริกา)
• เป็นบริษัทหนังสือพิมพ์ที่ใหญ่ที่สุดในประเทศ
และมีสถานีโทรทัศน์มากกว่า 21 สถานีมีส่วน
แบ่งทางการตลาดถึง 17% ในปี 1995 บริษัท
ได้ซื้อกิจการจาก Multimedia Inc.ทำาให้
Grannett มีเครือข่ายอยู่ใน Indaiana,
lllinois, Kansas, North Carolina and
Oklahorna

10. ประเด็นปัญหาที่เกิด
• Who >>>COX
• What >>>สนใจซื้อธุรกิจของ
Gannett
• Where >>>USA
• When >>>July 1999
• Why >>> ผู้นำาระบบ
communication/ economic of
scale/member 522,000 ราย
• How >>>> Grannett ใช้วิธีเปิด

11. • Why is Cox Communications (CCI) acquiring Gannett?
Given the proposed $2.7 billion purchase price, at what
assumed terminal growth rate does the acquisition
make sense?
• Assuming that the Gannett acquisition goes through,
estimate Cox’s short-term (1.5 years) and long-term
(4.5 years) funding needs. How much of each funding
need must be met through external financing?
• Cox Communications, Inc., 1999:

12. • What key constraints does Mr. Clement face in
satisfying Cox’s funding needs? You may assume that
the parent of CCI (i.e., Cox Enterprises, CEI) has
mandated a 65% floor on their economic stake.
• Which solution in Exhibit 8 seems to satisfy the
financing constraints determined above and why?
• Cox Communications, Inc., 1999:

17. дѥі ѠѠдшіѥѥіў ьѨҟўіѪѠдѥі дѬҖѕ Ѫєѝ
юіѣѱѕньҙѰјѣеҖѠлѼѥдѤчѲьдѥіѠѠдшіѥѥіўьѨҟўіѪѠдѥідѬҖѕѪєеѠкѝ COX
юі ѣѱѕ н ь ҙ е ҖѠлѼѥд Ѥч
1. шҖьъѫьъѥкші кѰј ѣшҖьъѫьъѥкѠҖѠєеѠкдѥі ѠѠдші ѥ
ѥі ў ьѨѸшѼѷѥдњҕѥшҖьъѫьѲьдѥі ѠѠдў ѫҖь ѥєѤрѝ ѝ
2. шҖьъѫьдѥі чѼѥѯьѧькѥьлѣщѬддњҕѥюі ѣєѥц 2%
1. COX єѨз њѥєдѤкњј ѯдѨѷѕњдѤэяј ді ѣъэч Җѥьдѥі ѯкѧь
Ѱј ѣі ѣєѤчі ѣњѤкѲьдѥі лѣѠѠдші ѥ ѥі ў ьѨѸѯьѪѷѠклѥдѝ
ѯєѪѷѠюѨ1995 Cox єѨші ѥ ѥі ў ьѨѸѯё ѧѷєеѩѸьѝ 1.9 ёѤьј Җѥь
чѠј ј ѥі ҙші ѥ ѥі ў ьѨѸєѨѠѥѕѫі ѣў њҕѥкѝ 5 - 30 юѨѰј ѣєѨ
яјшѠэѰъьѲьнҕњк 65-115 Basis point
2. COX ѯюѶьэі ѧќ ѤъѕҕѠѕъѨѷєѨші ѥ ѥі ў ьѨѸѲў р ҕъѨѷѫчѲьѝ ѝ
дј ѫҕєеѠк CEI
3. дѥі ѠѠдѤчҕњьеѠкшіѥѥіўьѨѸшҖѠкѯўєѥѣєдѤэѝ ѝ ѝ ѝ
ші ѥ ѥі ъѫьеѠкэі ѧќ Ѥъѝ
4. ѤчҕњьеѠкўьѨѸѧьѝѝ ѝ /дѼѥѳі дҕѠьў Ѥдѓ ѥќ ѨчѠдѯэ ѨѸѕлҕѥѕ
Ѱјѣзҕѥѯ ѪѷѠєіѥз ѥѝ (DEBT/EBITDA)
5. ѯюҖѥўєѥѕ ѤчҕњьеѠкўьѨѸѧьѝ ѝ ѝ /дѼѥѳі дҕѠьў Ѥдѓ ѥќ Ѩ
чѠдѯэѨѸѕлҕѥѕѰј ѣзҕѥѯѪѷѠєіѥзѥѲўҖѳєҕѯдѧьѝ 5 о ѩѷкѯюѶь
ѠѤші ѥ Ѭк ѫчѝ ѝ
6. і Ѥдќ ѥдѥі лѤчѯді чў і ѪѠѠѤьчѤэдѥі ј къѫьѳєҕѲў ҖшѼѷѥ
дњҕѥѯчѧє ъѨѷяѬҖэі ѧў ѥі ѕѠєі Ѥэѳч Җэі ѧќ ѤъєѨз њѥєєѤѷьз к
7. яј ді ѣъэеѠкшј ѥчѲьдѥі ѠѠдші ѥ ѥі ў ьѨѸѝ (дѤэў ѫҖь
еѠк Cox) лѣѠѕѬҕъѨѷ1%-2%

19. Exhibit 6 Yields for Government and Corporat e Bonds for July 15, 1999.
1 Year 2 Year 3 Year 5 Year 10 Year
Treasury Bonds 5.38 5.64 5.7 5.83 5.83
US Treasury Strips 5.38 5.66 5.71 5.88 6.16
A Rated Industrial Bonds 5.99 6.33 6.44 6.7 6.93
BBB Rated Industrial
Bonds
6.3 6.62 6.81 7.05 7.37
BB Rated Industrial
Bonds
6.84 7.51 7.71 8 8.8
Source: Bloomberg.
дѥі њѧѯз і ѥѣў ҙъѥкѯј ѪѠд
1. шҖьъѫьѲьдѥі ѠѠдў ѫҖьдѬҖшѼѷѥдњҕѥ2%
2. ѳч Җі Ѥэяј юі ѣѱѕньҙъѥкѓ ѥќ Ѩ
юѨ I nterest Tax
(34% )
Discount 7% шҕѠюѨ
2001 657-443 = 214 72.76 63.55
2002 667-472 = 195 66.3 54.12
2003 640-432 = 208 70.72 69.30
юі ѣў ѕ Ѥч ѓ ѥќ Ѩ 86.97

21. 1.คำำนวณหำ Free cash Flow 1999 E 2000 E 2001 E 2002 E 2003 E
EBITDA 878 1,344 1,490 1,697 1,913
Depreciation -197 -261 -216 -164 -147
Interest -312 -540 -443 -472 -432
Taxes -85 30 10 10 10
N O PAT (โจทย์) 285 573 842 1,070 1,344
บวก Depreciation 197 261 216 164 147
หัก C apex -3,778 -1,256 -1,044 -812 -724
บวก(หัก) C ash from Operation 566 804 1,047 1,225 1,481
Free cash Flow -2,730 382 1,061 1,647 2,248
คิดลดกระแสเงินสดเป็นมูลค่ำปัจจุบัน โดยใช้ อัตรำผล
ตอบแทนพันธบัตรกลุ่มอุตสำหกรรม
ทริปเปิล B อำยุ 5 ปี (ตำรำง 6) 7.05% คิดลดกระแสเงินสด
Exhibit 8A did not purchase Gannett,
but if other proposed

22. ประมำณกำรกระแสเงินสดสำำหรับกำรติดต่อ
สื่อสำร Cox ถ้ำซื้อแกนเนตต์โดย
กำรออกตรำสำรหนี้ (หลัก : ล้ำนดอลลำร์)
• Exhibit 8B
1.คำำนวณหำ Free cash Flow
EBITDA 878 1,495 1,653 1,873 2,103
Depreciation -197 -267 -221 -169 -152
Interest -312 -540 -657 -667 -640
Taxes -85 30 10 10 10
NOPAT (โจทย์) 284 718 785 1047 1321
บวก Depreciation 197 267 221 169 152
หัก Capex -3,778 -3,986 -1,069 -837 -749
บวก(หัก) Cash from
Operation 566 955 996 1,207 1,463
Free cash Flow -2,731 -2,046 933 1,586 2,187

23. Exhibit8BProformacashflowsforCoxCommunicationsifitpurchasesGannettbyissuingdebt(figures
areinmillionsofdollars).ž¦³¤µžžµ¦ž¦³Â­Ážž­ ž­Îµ®¦´žžºÊ° žžÁžžžrÞ¥žµ¦° ° žž¦µ­ µ¦®ž¸Ê·
1999E 2000E 2001E 2002E 2003E
OPERATINGACTIVITIES
EBITDACox+Acquisitions 878 1,344 1,490 1,697 1,913
EBITDAGannett 0 151 163 176 190
Interest Expense -312 -540 -657 -667 -640
TOTALCASHFROMOPERATIONS 566 955 996 1,207 1,463
INVESTINGACTIVITIES
Acquisitions -2,673 0 0 0 0
Gannett Acquisition 0 -2,700 0 0 0
CapEx -983 -1,334 -1,103 -847 -759
Total Other -122 48 34 10 10
TOTALCASHFROMINVESTMENTS -3,778 -3,986 -1,069 -837 -749
FINANCINGACTIVITIES
EquityIssued 0 0 0 0 0
Monetization 1,243 1,500 0 0 0
BeginningDebt 4,091 6,249 7,781 7,854 7,484
MaturingDebt -431 -341 -200 -277
NewDebt Financed(Retired) 1,968 1,962 414 -169 -437
EndingTotal Debt 6,249 7,781 7,854 7,484 6,770
TOTALCASHFROMFINANCING 3,401 3,031 73 -369 -714
CONDENSEDINCOMESTATEMENT
EBITDA 878 1,495 1,653 1,873 2,103
Depreciation -197 -267 -221 -169 -152
Interest -312 -540 -657 -667 -640
Taxes -85 30 10 10 10
Net Income 285 718 785 1,047 1,322
DEBTRATIOS
ProFormaAnnualizedEBITDA 1,201 1,495 1,653 1,873 2,103
LeverageRatio 5.2x 5.2x 4.8x 4.0x 3.2x
EQUITYINTEREST
CoxFamilyEconomicEquity 67.30% 67.30% 67.30% 67.30% 67.30%
CoxFamilyVotingEquity 76.80% 76.80% 76.80% 76.80% 76.80%
Source:CoxCommunications,Inc.

24. ประมำณกำรกระแสเงินสด Cox ถ้ำซื้อแกน
เนตต์โดยกำรออกตรำสำรทุน (หลัก : ล้ำน
ดอลลำร์)
Exhibit 8C

25. Exhibit 8CExhibit 8C Pro forma cash flows for CoxPro forma cash flows for Cox
Communications if it purchases Gannett by issuing eCommunications if it purchases Gannett by issuing e
quity (figures are in millions of dollarsquity (figures are in millions of dollars

31. Suggested Format for Case Analyses:
Cox Communications, Inc., 1999:
1. Why is Cox Communications (CCI) acquiring Gannett? Given the proposed
$2.7 billion purchase price, at what assumed terminal growth rate does the
acquisition make sense?

33. 4. Which solution in Exhibit 8 seems to satisfy the financing constraints
determined above and why?
4.1 If did not purchase Gannett
Net Income 285 573 842 1,070 1,344
DEBTRATIOS
ProFormaAnnualizedEBITDA(f) 1,201 1,344 1,490 1,697 1,913
LeverageRatio(g) 5.2x 3.9x 3.5x 2.8x 2.1x
4.2 If purchases Gannett by issuing dept
Net Income 285 718 785 1,047 1,322
DEBTRATIOS
ProFormaAnnualizedEBITDA 1,201 1,495 1,653 1,873 2,103
LeverageRatio 5.2x 5.2x 4.8x 4.0x 3.2x
4.3 If purchase Gannett by issuing equity
Net Income 339 948 1,029 1,293 1,584
DEBTRATIOS
ProFormaAnnualizedEBITDA 1,201 1,495 1,653 1,873 2,103
LeverageRatio 2.9x 3.2x 2.8x 2.1x 1.4x
4.4 If purchase Gannett with a combination of dept, equity and
PRIDES
Net Income 287 786 863 1,123 1,440
DEBTRATIOS
ProFormaAnnualizedEBITDA 1,201 1,495 1,653 1,873 2,103
LeverageRatio 4.0x 4.2x 3.8x 3.1x 2.4x
­¦»žªnµÁ¨º° žž¸Éž³Ážoµžªžžžžµ¦· Gannett Þ¥žµ¦ issuing equity Á¡ ¦µ³žÎµÄ®ož¦¬´ž¤¸· Net Income
­¼žÂ¨³¤¸D/E Ratio ° ¥»nÄž­ ´ž­nªžž¸ÉžÎɵ¨³¨ž¨žžµ¤¨Îµž´ž

34. Thank you