Mediacom Communications said Monday it had reached a deal to buyback 30% of its outstanding stock from a long-time investor in exchange for non-strategic cable systems with 25,000 subscribers and about $110 million in cash.
Shivers Investments, a vehicle run by long-time Mediacom supporter Morris Communications, will exchange 28.3 million shares of Mediacom stock for 100% of the shares owned by a new subsidiary of Mediacom which will hold the non-strategic cable systems and cash. The deal, which will take the form of a tax-free split-off, values Mediacom shares at about $6.50 per share, a substantial discount to its trading price of $7.45 on Sept. 5.
In a Monday morning research note, Miller Tabak media analyst David Joyce wrote that the valuation could be seen as a financial positive because Mediacom appears to be getting a big chunk of its stock at a discount. But Joyce added that the shares could see some downward pressure if the market perceives the $6.50 valuation as a signal for what the company should be worth.
So far, the market is looking on the deal favorably. Mediacom shares were up 36 cents each (4.8%) to $7.81 each in early trading Monday.
Shivers and Morris Communications are owned by William S. Morris III, a Mediacom director and long-time backer of the firm. Morris helped create Mediacom with chairman Rocco Commisso about 10 years ago. Morris and Craig S. Mitchell, the Morris Communications executives that hold seats on Mediacom’s board of directors will resign those positions.
Mediacom said it appointed a special committee of three independent directors to evaluate the terms of the transaction. The special committee then retained Lehman Bros. as financial adviser and New York law firm Willkie, Farr & Gallagher to assist the committee in its evaluation. Based on the recommendation of the special committee, Mediacom’s board of directors unanimously approved the transaction on Sept. 7, with the two directors affiliated with Shivers abstaining.
RBC Daniels acted as financial adviser to Morris Communications.
“Mr. Morris played a key role during Mediacom’s formative stage by making the largest equity investment in our company a decade ago and, with his associate, Craig S. Mitchell, served on Mediacom’s board of directors since we went public in 2000,” Commisso said in a statement. “I am extremely grateful for their contributions, thank them for their support throughout our long association and wish the entire Morris organization the best in the future.”