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K.C. Neel
The cable industry could see another initial public offering soon if Mediacom LLC decides to sell some equity in the wake of its $740-million acquisition of Triax Midwest Associates L.P. last week.
The deal counting some 324,000 Triax customers doubled Mediacom's subscriber count giving the Middletown, N.Y.-based MSO a total of 725,000 customers in non-metropolitan markets in 20 states.
With that deal, Mediacom will be big enough to warrant some attention on Wall Street. Mediacom chairman Rocco Commisso says he's giving an IPO "serious consideration."
"First we have to close the Triax deal and assimilate the properties," he says. "Then we'll consider going public maybe early next year."
The Triax acquisition is being financed with debt, which can make a deal easy and clean cut. But that strategy can backfire on some buyers. When Charter Communications bid for Prime Cable in Las Vegas last year, the company lost to Cox Communications partly because it didn't have a public security to trade. Charter president Jerry Kent pointed out that many times the tax ramifications of a cash deal will force some owners to shy away. By taking stock, capital gains taxes can be minimized.
Charter has since then been swallowed up by billionaire Paul Allen in a private cash deal. But even Allen, with his deep pockets, is considering selling some of his cable system empire to the public to gain financing flexibility. He's already successfully gone to the public debt markets raising some $3 billion in available funds.
With a publicly traded security, Mediacom would have the versatility to use several different financing methods to acquire properties. And to be sure, Mediacom isn't finished buying up cable systems, Commisso says.
"We can accumulate and assimilate more systems over time," he says. "We're here to grow smartly. I can see large operators continuing to sell off non-strategic assets as they move to consolidate and cluster and we'll be in a good position to pick up some of those properties."
Mediacom specializes in operating in smaller markets but that doesn't mean the company has eschewed upgrading its properties and offering new services. Indeed, Commisso figures 80% of Mediacom's plant will be upgraded to 550 MHz or above by the end of 1999.
"We've rebuilt 7,600 miles of plant in two years," Commisso says. "By the end of this year we'll have plant that is as good or better than anyone in the business and we'll be far and away ahead of any of the smaller operators."
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