Bloomberg reported this morning that
RCN Corp (NDAQ:RCNI) may be considering a possible sale of the company, after it retained Blackstone Group LP as an advisor to the company. The company - which only recently emerged from bankruptcy - moved up 7% on the news. But is there any substance to this deal? If so, how much would the deal be worth?
When many people consider buyout situations, the first thing they look at is the Enterprise Value (EV), which takes into account the company's market cap, debt, minority interest, preferred shares, and cash. This tends to give a more accurate estimate as to the worth of a company because it takes into account both debt and cash - which would have to be acquired with the company. RCN has an EV of $1.07 billion or approximately $28.80 per share, a premium to even today's price. The company also sold some of its assets in the past (seen in
this 8K), where its customers were valued at $2,500 each. Using this valuation, we can estimate that their customer base alone (418,000 as of April) is worth about $1.04 billion. Considering the company only has around $205 million in debt, $98 million in cash, plus the potential for a premium, makes the company look attractive as an asset buyout play.
Whether or not the deal will go through depends on a number of factors; however, it is definitely a strong possibility. Any actions taken by the Board to steer the company in this direction can be found in
future SEC filings - most likely
8K filings. This stock is definitely a good one to keep an eye on as these events continue to unfold!
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