RCN has entered into a definitive agreement to be acquired by investment fund Abry Partners for $1.2 billion, the two companies announced this morning.
Abry is paying $15 per share for RCN, which is a 43 percent premium over RCN’s average closing share during the past 30 trading days and a 22 percent premium over yesterday’s share price. Abry will also assume RCN’s debt, which is currently more than $700 million.
“This seems to be a vote of confidence in the long-term prospects of pay-TV service providers,” In-Stat principal analyst Michael Paxton wrote in an e-mail to CED this morning.
Financing for the deal included a combination of equity to be invested by Abry and debt financing that will be provided by SunTrust Robinson Humphrey Inc., GE Capital, Societe Generale and certain of their affiliates.
The deal is slated to be finished in the second half of this year once it passes regulatory and stockholders’ approvals.
Under the terms of the merger agreement, RCN can solicit proposals from third parties for 40 days through April 14. The two companies said that there can be no assurances that this process will result in an alternative transaction. RCN also said that it doesn’t intend to disclose developments with respect to the solicitation process unless and until its board of directors has made a decision.
Deutsche Bank Securities Inc. and Waller Capital Partners acted as financial advisors to the Special Committee of RCN's board, while Jenner & Block acted as counsel to RCN.
SunTrust Robinson Humphrey acted as the exclusive financial advisor to Abry and will also serve as Left Lead Joint Bookrunner and Administrative Agent for the debt financing. GE Capital Markets and SG Americas Securities will also act as joint bookrunners for the debt financing. Edwards Angell Palmer & Dodge acted as counsel to Abry Partners.
RCN provides triple-play services in metro areas such as Washington, D.C., New York City, Philadelphia, Boston and Chicago, where it competes against Comcast in most of those markets. Last year, RCN said it was close to completing its “Analog Crush” analog-to-digital project, with the Lehigh Valley, Pa., area being the last system scheduled for the all-digital conversion.
RCN was founded as an “overbuilder” in 1997, and as of Sept. 30, it had 367,000 video customers, which puts it at 15th on the NCTA’s list of largest MSOs in the country.
Earlier this week, RCN said it would use TiVo boxes as its primary DVR in all of its markets starting in the second quarter.
RCN also has a successful business division, RCN Business Services, which rolled out a DOCSIS 3.0 tier to SMBs in November.
Last month, RCN Metro Optical Networks, which is also a division of RCN Corp., announced that Pacific Northwest had signed up for its Ethernet service.
Due to the pending transaction, RCN cancelled its fourth-quarter earnings call that was scheduled for Tuesday, but here’s a look at the company’s third-quarter results from last year.