Founder To Take Small Cable Operator Mediacom Private in $600 Million Deal

Chairman and CEO Rocco Commisso will pay $8.75 a share for the company's stock that he doesn't own yet

NEW YORK - Another cable operator is going private.

Small operator Mediacom Communications said Monday it has agreed to let its founder, chairman and CEO Rocco Commisso acquire the shares he doesn't already own for $8.75 each, valuing the company at about $600 million.

In May, he had proposed a $6 a share buyout, which he withdrew at the end of August after the Mediacom board seemed opposed to a sale without a major increase in his offer.

The new price of $8.75 per share represents a 46% premium above Commisso's original $6 offer, a 28% premium to Friday's $6.86 close and is also a 64% premium above the stock's closing price of $5.33 on the trading day before he announced his original May 31 proposal.

"While longer-term investors are likely still going to be disappointed, since our various valuation metrics could suggest a mid-teens per share value in a couple of years, this is a more palatable premium to recent trading prices," said Miller Tabak analyst David Joyce.

The deal is expected to be completed in the first half of 2011.

Commisso already controls the company, owning about 40% of its equity and 87% of its voting stake. Mediacom shares soared more than 20% in early Monday trading to get near Commisso's offer price.

It is the latest in a string of buyouts that have taken cable operators private as some on Wall Street have said cable stocks haven't always fully reflected companies' underlying value.

In 2004, Cox Communications ended its stock market listing as parent Cox Enterprises took it private again. Small operator Insight Communications followed, and Cablevision Systems owners the Dolan family tried a going-private deal several times in recent years. More recently, RCN Corp. in March announced a going-private deal with private equity firm ABRY Partners.

The Mediacom price tag amounts to 6.8 times the Wall Street consensus for the company's 2011 operating cash flow, a higher multiple than those assigned to publicly traded cable firms, Sanford C. Bernstein analyst Craig Moffett highlighted.
Comcast trades at a stock price of about 5.3 times expected 2011 operating cash flow, Time Warner Cable at 5.6 times, and Cablevision Systems at 6.4 times, he said. Were they all trading at the same 6.8 times multiple, "their stock prices would be about $28 (up 37%), $88 (up 40%), and $32 (up 10%), respectively," Moffett said. "This deal speaks to the still gaping differential between private and public market valuations for the cable operators," he concluded.