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Cox Communications Case

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Cox items for discussion

1. Why is Cox acquiring Gannett? Does it make sense at 2.7 billion.
2. Assuming the Gannett acquisition goes through, estimate CCI’s (1 ½ years) and long term (4 ½ years) funding needs. How much of each funding need must be met through external financing?
3. What constraints do they face in satisfying CCI’s funding needs? Assume a 65% floor on CCIs economic stake”
4. Analyze the proposed solutions. What is a Felines Prides security? What are the advantages/disadvantages to firms using this security? Decompose this security into its debt and equity components. What, economically, is a firm doing when it issues a Felines prides security.?
5. What solution seems to satisfy the financing constraints determined above and why?
Guidelines for discussion
What changes are occurring in the cable industry? Why has CCI undertaken undertaken so many acquisitions recently?
The Gannett acquisition is still under negotiation . In this acquisition a positive NPV project at a price of $2.7 billion.
What constraints does CCI face it meeting its financing needs.What is the menu of financing choices facing them, and the costs and benefits of each choice.
How do Felines Prides securities provide benefits of both debt and equity. How does use of them create value for CCI?
How can the FP securities be accounted for in calculating the leverage ratio and the Cox familys equity stake in CC? What is the correct value of the familys economic equity stake after the issuance of FPs?

ANSWERS

1. Because of the rapid growth of cable industry and technology innovations, cable companies needed to expand their business. They wanted to expand their customer bases via acquisition in order to reduce the huge amount of fixed costs. As showed in exhibit 1, many bigger companies were buying other smaller ones. Under this circumstance, it was

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