Analysts Weigh In On Mediacom Offer

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The analyst reports have started to trickle in regarding Mediacom chairman and CEO Rocco Commisso's latest attempt to take the small market MSO private and so far the message to shareholders is: Take the deal.
Earlier Monday Mediacom announced that its special committee of independent directors had accepted an offer of $8.75 per share from Commisso for every share the chairman does not own. The deal represents a 46% premium to the $6 per share offer Commisso made in June. That June offer was rejected as too low.
The handful of analysts that follow Mediacom stock were almost unanimous in their opinions, with Pivotal Research Group principal and media & communications analyst Jeff Wlodarczak summing up the sentiment best: "Take the Money and Run."
In a report Monday, Wlodarczak wrote that while Mediacom's credit availability could technically allow Commisso to bid higher (as much as $9.50 per share), he wrote that debt levels at the company are "already pushing the envelope" and that it is unlikely that share "will see these price levels again for many years (if ever) if this bid is not accepted."
Citigroup media analyst Jason Bazinet took it a step further in his report on the deal, adding that in his estimation, it would take Mediacom about three years to reach the $8.75 level.
Bazinet liked the valuation of the deal - it pegs Mediacom at about 6.8 times 2011 estimated cash flow, a premium to peers that are trading in the 5- to 6- times range. And the price represents a premium of about 28% to Mediacom's Nov. 12 $6.86 per share closing price.
Sanford Bernstein cable and satellite analyst Craig Moffett, who does not officially cover Mediacom, wrote in a report Monday that the deal highlights the widening gap between public and private cable valuations. He estimated that Comcast trades at about 5.3 times 2011 estimated cash flow, Time Warner Cable at about 5.6 times and Cablevision Systems at about 6.4 times. Applying the 6.8 times value of Mediacom in the latest offer, Moffett wrote, would boost Comcast's share price to $28 (a 37% gain); Time Warner Cable to $88 (a 40% rise) and Cablevision to $32 (a 10% increase).
Commisso first attempted to take Mediacom private in June for $6 per share, a 13% premium to its $5.33 price the day before on May 31. The current offer represents a 64% premium to that May 31 price.
Comparisons to other going-private deals in the cable industry - Insight Communications in 2006 and Cox Communications in 2004 - also show that Commisso's offer appears to be a sweet one.
Insight went private in 2006 at $11.75 per share, a 21.4% premium to its $9.68 price the day before the initial offer was made. Cox Communications went private in 2004 at $34.75 per share, a 26% premium to its $27.58 price before the initial offer was made.
And the deal is even better than one that didn't get done - the Dolan family's three attempts between 2005 and 2007 to take Cablevision Systems private. The last offer made by the family ($36.26 per share) represented a 51.5% premium to its $23.93 closing price the day before the first offer was made in 2005.
Mediacom stock continued its rise on Monday, closing at $8.37 per share, up 22%, or $1.51 each.

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