ATLANTA – Cox Enterprises Inc. announced a $7.9 billion proposal Monday to buy all publicly held shares of Cox Communications Inc. (COX) and take the nation's fourth largest cable television provider private. Shares of Cox Communications surged more than 21 percent on the news.
The proposed move would make Atlanta-based Cox Communications a subsidiary of Cox Enterprises (search), which is a private company that owns newspapers and telecommunications services.
Under the deal, Cox Communications, which has about 6.3 million cable customers, would continue to operate as an autonomous business entity, and no major changes or layoffs are expected, said Cox Enterprises spokesman Bob Jimenez. Cox Radio Inc. will remain a publicly traded company, he said.
Under the proposal, Cox Enterprises, which already owns about 62 percent of Cox Communications, would pay $32 a share to take control of the remaining 38 percent of the cable provider. That price per share is 16 percent higher than the $27.58 price at which Cox Communications' stock closed on Friday. It's also a 14-percent premium over the 10-day average closing price.
"We think it's fair based on our assessment of today's marketplace," Jimenez said. "We really feel this is a chance for CEI to make a substantial additional investment in an asset we know really well."
Shares of Cox Communications jumped $5.90 to $33.48 on the New York Stock Exchange (search).
Citigroup Global Markets and Lehman Brothers Inc. have committed $10 billion to the deal. Cox Enterprises will use $7.9 billion for the tender offer and merger, and the remaining $2.1 billion will be used for refinancing its existing indebtedness, working capital and other corporate purposes.
Cox Enterprises chairman and CEO Jim Kennedy told the board of directors in a Sunday letter that his company hopes to purchase 90 percent of Cox Communications' Class A common shares through the tender offer.
"We anticipate acquiring any shares not purchased in the tender through a merger," Kennedy wrote.
Cox Enterprises expects the Cox Communications board of directors to form a special committee, which will retain its own legal and financial advisers, to negotiate the proposal and ultimately approve the deal. Directors with Cox affiliation will not participate.
Jimenez would not put a timetable on when he expected the committee to approve the deal, but he said he expected the process to "take place shortly."
Jimenez would not address reports that Cox Communications is growing weary of the burdens of public ownership and wants to become a privately held entity so it can compete with more stealth in the fiercely competitive cable industry.
"We have always competed aggressively. We've never shied away from competition," he said. "We've always felt that this deal allows us to focus our business more on the long-term, and not so much the quarterly numbers."
In his letter, Kennedy indicated that focusing on short-term results in such a competitive industry hinders Cox Communications in achieving its business objectives.
Cox Communications, which operates in 15 states, has managed to transform itself from a traditional cable operator into a provider of TV, telephone and high-speed Internet services. In 1997, it became one of the first cable companies to offer phone service and today sells phone service to more than 1.1 million customers.