BEVERLY, Mass. (AP) _ American Cablesystems Corp.’s stock soared more than $16 a share Wednesday after the company announced it would be acquired and taken private by its Boston-based competitor, Continental Cablevision Inc., for $481.7 million.
Under terms of the agreement, American stockholders would receive $46.50 for each share of class A and class B common stock they hold, the companies said in a statement.
American’s stock closed at $26.375 a share Tuesday on the American Stock Exchange. But when trading began at 11:21 a.m. EDT Wednesday after a two-hour delay, the company’s stock had skyrocketed to a record $41.875 a share before closing even higher at $42.50.
Over the past 52 weeks, American’s stock has traded only as high as $31 a share.
Mary Kukowski, a vice president and media analyst at Bear, Stearns & Co. in New York, said the market price of American’s stock ″did not reflect the likely value of its Los Angeles systems.″
Kukowski noted that in the last few years, American has purchased a number of troubled cable systems in the Los Angeles area and has put them on the road to financial recovery.
Tim Neher, president of the privately held Continental, said the offer ″reflects the private market value of the properties.″ Neher said that the public historically has valued American ″30 to 40 percent less than the private market″ would appraise the company.
Neher said that any bid below his company’s $46.50-a-share offer ″would no doubt have attracted a second bidder.″
American Cablesystems, through its subsidiaries and limited partnership affiliates, operates cable television systems in California, Florida, Illinois, Massachusetts and New York.
American and its affilates serve 505,000 subscribers, the statement said. Continental, the third-largest company in the fragmented cable industry, serves about 1.5 million subscribers in 13 states.
The acquisition is subject to shareholder and regulatory approval. American’s shareholders are expected to vote on the deal at a special meeting scheduled for later this year.
Steven B. Dodge, chairman and chief executive officer of American, said in a statement that the deal should close by January. ″We are confident that our employees, subscribers and franchise authorities will be in very good hands with Continental,″ he said.
American, based in Beverly, Mass., was founded in 1978 and went public May 7, 1986 at $14.50 a share. Spokesman Curtis Wolff declined to discuss the reasons for the sale, but he noted that ″the market for publicly traded companies has been a buyer’s market, and American has been a high-growth company.″
The statement said Continental also entered into agreements with Dodge and several other major shareholders who together own about 30 percent of the company.
The agreements give Continental an option to purchase their shares at $46.50 and allow Continental to vote those shares in connection with the merger and other major corporate transactions, the statement said.
American currently has about 10.36 million shares of class A and class B common stock outstanding or reserved for issuance. The company is in the process of converting class B shares into class A common stock.