After two previous attempts to take the small market MSO private failed, Mediacom Communications chairman and CEO Rocco Commisso discovered the third time's the charm, as his $8.75 per share offer for the company was accepted Monday.
Commisso, who founded Mediacom in 1995, had made an offer to purchase the remaining interest in Mediacom he did not own for $6 per share in June, only to be rejected by a special committee of independent directors as too low. A second offer of $6.40 per share (Commisso also indicated he would go as high as $7.35 per share) was also rebuffed by the committee. Commisso dropped his bid for the company in August, expressing disappointment with the independent committee's decision.
But talks apparently continued and on Monday Mediacom announced that it has entered into a definitive merger agreement with Commisso and an entity created by the chairman. Upon consummation of the merger, all shares that are not owned by Commisso will convert into $8.75 per share in cash, a 46% premium to his original June offer and 28% above its Nov. 12 close of $6.86 per share.
The new offer is still short of what some analysts believe the company is worth - some have pegged it as above $9 per share - but should pass muster with investors.
"While longer-term investors are likely still going to be disappointed, since our various valuation metrics could suggest a mid-teens per share value in a couple of years, this is a more palatable premium to recent trading prices," Miller Tabak media analyst David Joyce wrote in a research note.
Mediacom shares soared more than 23% ($1.62 per share) in early trading Monday to $8.48 each.
The deal is contingent on a "majority of the minority" voting provision, which requires approval of a majority of the Class A shares not held by Commisso. Commisso currently holds about 40% of Mediacom's outstanding shares and 87% of its voting control.
The transaction is expected to be completed in the first half of 2011.
"As I stated when the announcement was first made on June 1st, it is very important that you understand becoming a private company will not change the way we do business," Commisso said in a memo to employees Monday. "Mediacom customers are the absolute, number one priority for all of us, and we will strive to continue to provide them with great customer service and the very best products and services. I expect that the going private process will not distract any of us from managing the day-to-day operations of our company."
J.P. Morgan Securities and BofA Merrill Lynch provided financial advice to Commisso in the transaction. He also received legal advice from Baker Botts LLP. The special committee received financial advice from Barclays Capital and legal advice from Simpson Thatcher & Bartlett LLP.
Mediacom is the eighth largest cable operator in the country with about 1.2 million subscribers in several Midwest and Southern states.