Market says Cox Enterprises should pay more for Cox Radio


Cox Enterprises announced a tender offer Monday morning to buy the remaining 22% of Cox Radio for $3.80 per share, a total of around $69.1 million and a 15.2% premium over Friday’s closing price. The stock opened at that $3.80 price, but Cox Radio traded as high as $4.24 in the Monday session on expectations that the independent directors of Cox Radio will hold out for a higher price. The stock closed Monday at $4.12, up 82 cents for the day.

“Cox Enterprises is committed to operating media businesses, and as a private company can take a long-term perspective, which is especially valuable in the current economic environment,” said Jimmy W. Hayes, President and CEO of Cox Enterprises. “Given how these economic challenges are affecting the radio industry, we believe that private ownership offers advantages that will assist Cox Radio in attaining its business objectives and managing its capital structure. We have confidence in the long-term potential of Cox Radio and its management team. This transaction will allow us to further invest in a quality asset we know well and to best ensure Cox Radio maintains its best-in-class operations,” he said in announcing the tender offer.

“Not a done deal – don’t get too excited,” said Wachovia analyst Marci Ryvicker in a note to clients. “What we believe had supported the stock of CXR for some time was the potential for parent company Cox Enterprises to take it private. However, as the environment worsened and nothing happened, a potential take out became less of a catalyst.  Given what happened with Hearst Corporation’s rejected tender offer of HTV in Q4 2007, the transaction announced today is not a done deal.  We anticipate the stock to pop, but caution that this tender offer will likely be revised before it is accepted by CXR’s board,” she said.

“We expect that our Board of Directors will appoint a special committee of independent directors to review and consider the tender offer and make a formal statement to Cox Radio shareholders within ten business days.  Shareholders are advised to take no action at this time with respect to the tender offer pending the review of the tender offer by the special committee. We expect that this process will have no impact on day-to-day operations.  We do not intend to comment further at this time,” said a statement issued by Cox Radio.

The tender offer made by Cox Enterprises is scheduled to expire on April 17th. It is conditional upon a majority of the minority shareholders (those who are not executive officers, directors or affiliates of Cox Enterprises, Cox Media Group or Cox Radio) tendering their shares. If upon expiration of the tender offer, the shares owned by Cox Enterprises when combined with tendered shares are at least 90% of the outstanding Cox Radio shares, the radio company will be merged into Cox Enterprises and the remaining Cox Radio shareholders will  be squeezed out, paid the same per share price as paid in the tender offer.

Cox Radio owns, operates or provides sales and marketing services to 86 stations in 19 markets. The radio portfolio includes 71 FM stations and 15 AM stations.

In addition to its majority stake in Cox Radio, Cox Enterprises’ major operating subsidiaries include Cox Communications (cable television distribution, telephone, high-speed Internet access, commercial telecommunications, advertising solutions and the Travel Channel); Manheim Inc. (vehicle auctions, repair and certification services and web-based technology products); Cox Media Group, Inc. (television stations, digital media, newspapers, advertising sales rep firms and the Cox Radio stake); and (online automotive classifieds and related publications). Additionally, Cox’s Internet operations include and Adify Corporation, a unit of Cox TMI Inc. The privately owned company has annual revenues exceeding $15 billion and more than 77,000 employees.

RBR/TVBR observation: Cox Enterprises had already taken its cable television company, Cox Communications, private, so there had long been expectations that it would do the same with its only remaining unit with public stock, Cox Radio. Thus, the stock price had not been beaten down quite so much as other radio companies. We would not expect the independent directors and their advisers to kill the whole deal with their price demands, as happened some time back at Emmis. Nevertheless, the independent directors do have to ensure that the minority shareholders are not being taken advantage of. No doubt the powers that be at Cox Enterprises anticipated that there would be some pressure to up the bid.