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Cox Communications gets buyout offer

Sun, 08/01/2004 - 8:00pm
George Mannes

Copyright 2004 TheStreet.com Inc.

August 2, 2004 Monday 8:31 AM Eastern Time

The controlling shareholder of Cox Communications announced Monday an offer to take the cable operator private.

The offer, an unexpected twist in cable industry merger-and-acquisition activity, comes as cable stocks, suffering from lack of investor confidence over competitive threats and cash-flow forecasts, have been establishing new 52-week lows.

In its offer, Cox Enterprises says it will acquire the 38 percent of Cox Communications it doesn't already own for $32 a share in cash, amounting to $7.9 billion, including fees and expenses.

The offering price represents a 16 percent premium over Friday's closing price, the privately held Cox Enterprises said, and 14 percent over the 10-day average closing price for the stock.

But $32 per share well below the 52-week high of $36.95 Cox Communications, the nation's third-largest operator of cable TV systems, established in January; the stock was trading above $32 in the latter part of 2003.

Cox shares, which last month hit a 52-week low of $27.17, closed Friday at $27.58. In early morning trading Monday, shares changed hands at $33.75, reflecting expectations, perhaps, that the offer would be sweetened.

"Our proposal represents an excellent opportunity for [Cox Communications] shareholders, giving them the ability to receive a meaningful premium to recent trading values," Cox Enterprises CEO James C. Kennedy said in a statement. For Cox Enterprises, he said, "this is a chance to make a substantial additional investment in an asset we know well. An increasingly competitive environment convinces us that future investments in the cable industry are best made through a private company structure."

Cox Enterprises said it expected Cox Communications' board would establish a committee of independent directors to consider the proposal and engage in negotiations with Cox Enterprises.

The offer comes as most cable industry M&A attention was focused on Adelphia Communications, the bankrupt operator formerly controlled by the Rigas family of Coudersport, Pa.

Cox, along with Comcast, the nation's largest cable operator, and Time Warner, the nation's second-largest, were all expected to bid for at least part of Adelphia. But Cox Communications CEO Jim Robbins had said the company had no interest in acquiring all of Adelphia.

How the buyout offer for Cox will affect the Adelphia deal, and how it will affect cable stock valuations, remains to be seen. Shares in Comcast were up more than 2 percent in pre-market trading Monday.

Cox Enterprises, one of the nation's largest media companies, had $10.7 billion in revenue in 2003, according to a company statement. Along with its cable TV holdings, Cox Enterprises owns newspapers, television stations and, through the publicly traded Cox Radio, radio stations.

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