RealTime IT News

Cox Weighs $7.9B Bid

Cox Enterprises, the majority stakeholder in cable operator Cox Communications , 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 recently said television will be part of its fiber-to-the-premises 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.