Broadband firm RCN has a buyer
Private equity firm ABRY making another move in dealmakingBANGALORE -- Investment fund ABRY Partners offered to buy broadband services provider RCN Corp. for about $536 million, in yet another indication of private equity's renewed interest in dealmaking.
ABRY's offer of $15 a share in cash is 22% more than RCN's closing price on Thursday. Shares of the company were trading marginally above the offer price Friday on Nasdaq.
The private equity firm will assume the company's debt, which was about $730 million as of Sept. 30. Including the debt, the total deal value was about $1.2 billion.
The deal marks the latest in a line of acquisitions by private equity firms this year. TPG acquired IMS Health RX.N for $4 billion, followed by an investor group's offer for software maker SkillSoft and Bain Capital's acquisition of a Dow Chemical unit.
"The deal leaves a lot of money on the table," Miller Tabak analyst David Joyce said, adding that there is potential room for a superior bid.
The deal, expected to be completed in the second half of 2010, has a go-shop option that allows RCN to scout for better offers.
In a note to clients, Raymond James analyst Frank Louthan said the only other bidders that might emerge would be financial groups, and noted that the offer was at a slight discount to RCN's peers.
The offer implies an enterprise value of about 5.3 times EBITDA, he said. The company currently has an enterprise value that is 4.9 times forward EBITDA -- a 11% discount to its peers, according to StarMine data. Closest peer Knology's enterprise value is 6.6 times forward EBITDA.
RCN, which posted a narrower-than-expected loss for the third quarter, runs cable broadband networks and provides digital cable TV to residential and small businesses.
Apart from Knology, it competes with larger cable companies such as Time Warner and Comcast and fiber optics network operator AboveNet.
ABRY Partners, which manages about $2.75 billion in cash, is a Boston-based private equity firm specializing in media and information technology companies. ABRY owned Muzak, before the music and entertainment company filed for bankruptcy last year.
Deutsche Bank Securities Inc and Waller Capital Partners LLC acted as financial advisers to RCN for the deal, while SunTrust Robinson Humphrey acted as financial adviser to ABRY.
Shares of Herndon, Va.-based RCN, which have risen four-fold in the last 52 weeks, rose 23%, or $2.88, to $15.14 in afternoon trade.