Mediacom CEO moves to take co. private
Latest cable firm to contemplate end of stock market listingNEW YORK -- "Another one bites the dust." That was the title of the first comments by Sanford C. Bernstein analyst Craig Moffett about the latest cable operator's potential privatization.
Small cable operator Mediacom Communications said Tuesday morning that it has received a non- binding proposal from founder, chairman and CEO Rocco Commisso to take the company private at $6 per share in cash. The $250 million deal would come at a 12.6%, or $30 million, premium to Friday's closing price.
Commisso already controls the company, owning about 40% of its equity and 87% of the voting interest.
The move comes amid cable stock valuations that Wall Street and industry observers have said are below their potential despite cable's resistance in the recession.
"Yet another public cable operator has decided that public valuations are (still) simply too low to resist," said Moffett.
In 2004, Cox Communications ended its stock market listing as parent Cox Enterprises took it private again. Insight Communications followed, and Cablevision Systems owners the Dolan family tried a going-private deal several times a few years ago.
More recently, RCN Corp. in March announced a going-private deal with private equity firm ABRY Partners. And "we hear of several other private cable system transactions that could be in the works, all of which point to confidence in the business outlook by industry executives and private equity entities close to the sector," said Miller Tabak analyst David Joyce.
He expects Commisso may end up paying more to take Mediacom private. "Minority shareholders will not be fans of a privatization at this level, so there is a possibility that the special committee (evaluating the deal) could get a higher price," he said, pointing out that within the past few weeks, the stock had traded above $7.
Moffett also said the $6 per share price tag offered by Commisso "appears to be a relatively small price to pay." And BTIG analyst Richard Greenfield entitled his note to investors: "Public shareholders will not let Rocco steal the company for $6."
In line with those predictions, Mediacom shares closed up 17.6% at $6.27.
Given the high debt of Mediacom, Moffett also said that the willingness of banks to finance the proposed transaction is "notable."