Cox Enterprises, the majority stakeholder in cable operator Cox
Communications (Quote), is bidding for the 38 percent of the
company it does not already own.
The $7.9 billion cash offer works out to $32 per share and represents a 16
percent premium over Friday's close. In addition, Cox Enterprises has set
aside $2.1 billion for working capital and debts.
"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.
If successful, Cox Enterprises would take the company private. Given the
competition, the company believes that "future investments in the cable
industry are best made through a private company structure."
Cox Communications is expected to form a special committee of
independent directors to consider the proposal with the assistance of
outside financial and legal advisors and to negotiate the proposal.
Directors of Cox Communication affiliated with Cox Enterprises won't
participate in the evaluation of the proposal, which requires the approval
of the special committee.
Cox Enterprises is controlled by the Cox family and also owns the Atlanta
Journal-Constitution newspaper and a string of other media properties,
including radio stations.
The move comes at a crucial time for the sector. Rumors of consolidations
have been swirling for months. Most recently, Time Warner Cable executives
talked of their interest in buying the assets of bankrupt Adelphia Cable,
but no deal has been struck.
Cable companies, most of which also offer phone and broadband service, are
seeing increased competition from satellite rivals, as well as telecoms that
are running miles of fiber-optic cable -- capable of carrying TV and video
content -- to homes.
Verizon Communications (Quote) recently said television will be part of its
fiber-to-the-premises (define) package beginning next year.
The Cox Enterprises offer will pump up Cox Communications' stock and give a
lift to other cable companies, analysts at SG Cowen & Co. said in a report
to investors. At midday, Cox shares surged $5.66, or more than 20 percent,
to $33.24.
However, they "continue to believe that [long-term] competitive challenges
for the group remain," the analysts said.
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