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CEO Offers $600M for Mediacom

Mediacom Communications Corp. chairman and CEO Rocco Commisso sweetened the pot to take the MSO private, offering $8.75 for all outstanding shares in a deal that values the eighth-largest incumbent MSO at about US$600 million.

Commisso, who owns about 40 percent of Mediacom's common stock, originally offered $6 per share in May, but the bid was rejected by the company's board. Commisso pulled back the reins in August when the Mediacom board balked at a "meaningful," though undisclosed, increase to his initial offer price. (See Commisso Fattens Offer For Mediacom and Mediacom Staying Public.)

Today's board-approved offer of $8.75 per share represents a 46 percent premium over the original, and a 22 percent premium over the stock's close on Friday, Nov. 12. Investors swooped in following Monday's offer, causing Mediacom shares to rocket $1.64 (23.91 percent) to $8.50 each in morning trading.

Why this matters
Going private has increasingly become popular among some major and Tier 2 MSOs. Mediacom's looking to follow in the footsteps of Cox Communications Inc. , RCN Corp. , and Insight Communications Co. Inc. . The Dolan family tried to take Cablevision Systems Corp. (NYSE: CVC) private in 2007, but shareholders thwarted the move.

Mediacom still needs a majority of holders of Mediacom's outstanding class A shares to approve the deal, which is expected to close by mid-2011.

For more
For more on the US cable industry's trend on going private, please check out these stories:


— Jeff Baumgartner, Site Editor, Light Reading Cable

Jeff Baumgartner 12/5/2012 | 4:18:28 PM
re: CEO Offers $600M for Mediacom

BTIG analyst Richard Greenfield weighed in on this in a note this afternoon, holding that he and owners of MCCC stock would have liked to see a bid of $9 to $10, but still expects investors to overwhelmingly accept the sweetened $8.75 offer.


But Commisso apparently was able to go well above that 2nd offer that was rejected. According to Greenfield, Commisso was unwilling back in August to pay more than $7.75 per share... still a healthy premium over his original $6 offer. 


As for what's attractive for a private Mediacom-- at that point, they, like Cox, won't have to worry about Wall Street breathing down their necks regarding decisions tied  to network upgrades, wireless strategies, etc.


 JB


 

Jeff Baumgartner 12/5/2012 | 4:18:24 PM
re: CEO Offers $600M for Mediacom

With Mediacom now the latest MSO to blaze a path to privatization, should we expect more?


Probably not, at least in the view of Sanford C Bernstein senior analyst Craig Moffett.


"With the NBCU deal, the time has passed for Comcast to go private," he wrote in a note yesterday.  He painted a scenario in which Comcast could've pulled that trigger back in 1996.


But he also points out why going private is such an attractive option for some of these operators -- reasons beyond the fact that they can craft their strategies without worrying about what Wall St. thinks about it. 


"The deal speaks to the still gaping differential between private and public market valuations for the cable operators," he noted.


Broken down, he explains that the $8.75/share for Mediacom is 6.8x consensus 2011E EBITDA, while Comcast trades at 5.3x 2011E EBIDTA, TWC at 5.6x, and Cablevision at 6.4x.


 








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Jeff Baumgartner 12/5/2012 | 4:18:24 PM
re: CEO Offers $600M for Mediacom

Richard Greenfield may think the offer is too generous to warrant a fight, but there's one brewing.&nbsp;So far, I count at least eight announcements from lawfirms that are looking to investigate the offer.


They all pretty much read like this one from The Briscoe Law Firm, which is probing into whether the offer undervalues Mediacom shares and if it's fair to the shareholders. JB


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