Mediacom’s CommissoPulls Back Buyout Offer

Rocco Commisso is still in charge of a
publicly traded cable operator,
after his sweetest
buyout offer to Mediacom
Communications’ board
failed to clinch a deal.

Expressing disappointment
and frustration,
the Mediacom
chairman and CEO last
week announced he had
withdrawn his offer to
take the MSO private after
a special committee
of the company’s board
of directors rejected his higher offer.

Three months earlier, Commisso had offered to purchase
all the shares of Mediacom not owned by him for $6
per share, a deal which would have cost him about $250
million and valued the operator at about $427 million
(“Rocco Wants Privacy,” June 7, 2010, page 8).

Mediacom’s board of directors subsequently rejected “a
meaningful increase to his initial offer price,” according
to Commisso.

The Mediacom board wanted at least $8 — and as much
as $9 — per share for the shares Commisso does not own,
The Wall Street Journal reported. Commisso upped his offer
to $6.40 and indicated he would pay up to $7.35 per share,
according to the paper, citing anonymous sources.

In an interview with Multichannel News, Commisso declined
to disclose the amount of his higher offer. “I was
willing to be flexible but the committee wasn’t,” he said.

Commisso also said his offer to the board’s special committee
that the deal would be subject to the approval of the
holders of a majority of shares of Mediacom that he does
not own was a “major gift.”

Mediacom stock dropped 15%, to close at $5.80 per share
on Aug. 31, after Commisso announced the withdrawal of
his offer. Shares closed last Friday at $6.36.

“Rocco may come back a few quarters from now if the
general market still has such low valuations on these attractive
cable assets,” Miller Tabak media analyst David
Joyce wrote in a research note last week. He maintained a
“buy” on Mediacom “due to the potential for another offer
by the chairman/CEO sometime in the future or continued
public appreciation of cable assets, as private equity
has exhibited.”

In a statement, Commisso said, “I am very disappointed
with the highly unusual process and ground rules established
by the Special Committee and its financial and
legal advisers to evaluate my proposal.”

In particular, he complained that the committee “deprived
Mediacom’s public shareholders of the opportunity
to decide for themselves whether or not to accept”
his offer.

Middletown, N.Y.-based Mediacom, the eighth-largest
MSO in the U.S., has about 1.2 million basic video customers.

In recent years, Cox Enterprises took Cox Communications
private in 2004, while Insight Communications was
taken private in 2005 by inside investors and the Carlyle
Group. Cablevision Systems’ ruling Dolan family, though,
failed on three different attempts to take that cable company
private, rebuffed by shareholders on the third try in
2007 after a special committee of independent directors
approved the offer.

The special committee of Mediacom’s board of directors
formed to evaluate Commisso’s offer in June hired
Barclays Capital as financial adviser to assist in its review
and engaged Simpson Thacher & Bartlett LLP to provide
legal advice. Commisso had retained J.P. Morgan Securities
and BofA Merrill Lynch as his financial advisers, and
Baker Botts LLP as his legal adviser.