Commisso Increases Bid for Mediacom; Analysts Expect Shareholder Approval
Mediacom Chairman Rocco Commisso’s increased bid to take his company private will probably be approved by shareholders, cable analysts said. Mediacom’s board agreed to Commisso’s latest takeover bid of $8.75 a share, about $600 million total, the company said Monday. The board agreed after “extensive negotiations” between Commisso and a special committee of directors took place following Commisso’s initial $6 per-share bid in May, it said. Commisso already owns most of the company shares, but the deal requires approval by a majority of the other shareholders. The transaction won’t require FCC approval, and the company is reviewing its franchise agreements to determine whether any local approvals are needed, a spokesman said.
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The deal looks good for shareholders and for Commisso, Citigroup analyst Jason Bazinet wrote. Shareholders will probably want to cash out because Mediacom stock could take three years to reach the price Commisso has offered, he said. Commisso may benefit by selling Mediacom to a larger operator down the road, Bazinet said. Mediacom shares gained 22 percent to $8.40 Monday after the announcement. The 4 percent discount to Commisso’s bid isn’t an indication that investors expect the deal to fail, an analyst said. Such discounts are typical in mergers because there’s no guarantee the deal will close, and investors could put their money to more productive use before it does, the analyst said.
The buyout is one in a line of cable privatizations but probably doesn’t signal a wave of similar deals, Sanford Bernstein analyst Craig Moffett wrote. Now that Comcast has agreed to buy control of NBC Universal, “the time has passed” for Comcast to go private, he said. Cox Communications and Insight are already private, efforts by Cablevision’s controlling shareholders to buy out the company have failed repeatedly, and DirecTV and Time Warner Cable appear to be slowly shrinking their shareholder bases through buybacks, he said. The low cost of debt and low equity valuations are “at the heart of the industry’s ongoing privatization trend,” he said.
Mediacom had been seen by some in the industry as a candidate for takeover by a larger operator, in a deal similar to Cablevision’s recent agreement to buy Bresnan, Moffett said. Like Bresnan, Mediacom carries non-operating losses that could provide a tax benefit to a buyer like Cablevision, he said. “We may never know whether it was ever considered, but it certainly seems moot now,” he said. “That’s probably good news for Cablevision, which more than ever looks destined to be a share repurchaser."
The deal quickly attracted threats of class-action shareholder claims, as is typical in management-led buyouts. The Kendall Law Group in Dallas said it will investigate whether Commisso’s bid “significantly undervalues the company” and whether the board and Commisso violated their fiduciary responsibilities by not seeking competing bids. Rigrodsky & Long, which sued Mediacom in a Delaware court after Commisso’s $6 bid in May, is also seeking shareholders to represent. And the law office of Jonathan M. Stein in Florida said it’s investigating the deal and whether “Mediacom has disclosed all material information to shareholders about the transaction.”