Cox to Be Taken Private

Aug 2, 2004  •  Post A Comment

Cox Communications’ controlling shareholder, frustrated over the short-term focus of the public market and motivated by a desire to operate more freely in an increasingly competitive market, on Monday agreed to take the company private in a $7.9 billion deal.

Under the terms of the transaction, Cox’s biggest shareholder, Cox Enterprises, will pay $32 a share for the 38 percent that is currently publicly held in Cox Communications-a 16 percent premium over Friday’s close of $27.58 a share, and 14 percent higher than the cable operator’s average 10-day closing price. After the sale, the cable company would be a wholly owned subsidiary of privately held Cox Enterprises.

News of Cox’s pending privatization sent the cable company’s shares soaring 21 percent in midday trading Monday to $33.28 a share.

Analysts see the move as all but ensuring that Cox has taken itself out of the running for the assets of Adelphia Communications, as going private limits its ability to tap the public markets to finance a deal that could cost nearly $20 billion.

“An increasingly competitive environment convinces us that future investments in the cable industry are best made through a private company structure,” said Cox Enterprises Chairman and CEO James Kennedy in a statement.

Cable stocks have been hit hard in recent months as competition from telephone companies and satellite operators intensifies, and Wall Street penalizes cable stocks whenever multiple system operators respond to the threats with price adjustments.

Some analysts see the move as a response to Cox’s growing disappointment with the quarter-to-quarter focus of many investors. Others think it could signal Cox is gearing up to be a lot more aggressive in its battle with the phone and satellite companies, which could be a negative for other cable operators. But Wall Street analysts generally don’t see Cox’s management style changing much as result of going private.

Whether Cox’s move will motivate other cable companies to consider similar action remains to be seen. Many analysts see Cox’s situation as unique, given that Cox Enterprises controls 62 percent of the company. But it could prove to be bad news for John Malone’s Liberty Media, which for years has been angling to gain control of Cox’s 25 percent stake in Discovery Communications.

Richard Greenfield, an analyst at Fulcrum Global Partners, pointed out that with Cox Communications private and unlikely to go after the Adelphia assets, the need to sell the Discovery stake diminishes.