Mediacom’s Commisso Pulls Back Buyout Offer

By Todd Spangler -- Multichannel News, 9/6/2010 12:01:00 AM

Rocco Commisso is still in charge of a publicly traded cable operator, after his sweetest buyout offer to Mediacom Communications’ board failed to clinch a deal.

Expressing disappointment and frustration, the Mediacom chairman and CEO last week announced he had withdrawn his offer to take the MSO private after a special committee of the company’s board of directors rejected his higher offer.

Three months earlier, Commisso had offered to purchase all the shares of Mediacom not owned by him for $6 per share, a deal which would have cost him about $250 million and valued the operator at about $427 million (“Rocco Wants Privacy,” June 7, 2010, page 8).

Mediacom’s board of directors subsequently rejected “a meaningful increase to his initial offer price,” according to Commisso.

The Mediacom board wanted at least $8 — and as much as $9 — per share for the shares Commisso does not own, The Wall Street Journal reported. Commisso upped his offer to $6.40 and indicated he would pay up to $7.35 per share, according to the paper, citing anonymous sources.

In an interview with Multichannel News, Commisso declined to disclose the amount of his higher offer. “I was willing to be flexible but the committee wasn’t,” he said.

Commisso also said his offer to the board’s special committee that the deal would be subject to the approval of the holders of a majority of shares of Mediacom that he does not own was a “major gift.”

Mediacom stock dropped 15%, to close at $5.80 per share on Aug. 31, after Commisso announced the withdrawal of his offer. Shares closed last Friday at $6.36.

“Rocco may come back a few quarters from now if the general market still has such low valuations on these attractive cable assets,” Miller Tabak media analyst David Joyce wrote in a research note last week. He maintained a “buy” on Mediacom “due to the potential for another offer by the chairman/CEO sometime in the future or continued public appreciation of cable assets, as private equity has exhibited.”

In a statement, Commisso said, “I am very disappointed with the highly unusual process and ground rules established by the Special Committee and its financial and legal advisers to evaluate my proposal.”

In particular, he complained that the committee “deprived Mediacom’s public shareholders of the opportunity to decide for themselves whether or not to accept” his offer.

Middletown, N.Y.-based Mediacom, the eighth-largest MSO in the U.S., has about 1.2 million basic video customers.

In recent years, Cox Enterprises took Cox Communications private in 2004, while Insight Communications was taken private in 2005 by inside investors and the Carlyle Group. Cablevision Systems’ ruling Dolan family, though, failed on three different attempts to take that cable company private, rebuffed by shareholders on the third try in 2007 after a special committee of independent directors approved the offer.

The special committee of Mediacom’s board of directors formed to evaluate Commisso’s offer in June hired Barclays Capital as financial adviser to assist in its review and engaged Simpson Thacher & Bartlett LLP to provide legal advice. Commisso had retained J.P. Morgan Securities and BofA Merrill Lynch as his financial advisers, and Baker Botts LLP as his legal adviser.