Broadband and cable television services provider RCN Corp. (RCNI) announced Friday that its has agreed to be acquired by an investment fund managed by privately equity firm ABRY Partners LLC for about$ 1.2 billion, including the assumption of debt.
The transaction, which is subject to stockholder and regulatory approvals, is expected to be completed in the second half of 2010. Following the announcement, the RCN stock is tradings nearly 23% higher. Herndon, Virginia-based RCN is a provider of broadband services to residential and small-medium business customers under the brand names of RCN and RCN Business Services. RCN delivers all-digital and high definition video, high-speed Internet and premium voice services to its customers primarily in Washington, D.C., Philadelphia, Lehigh Valley, New York City, Boston and Chicago.
Under the terms of the deal, holders of RCN's issued and outstanding common stock prior to the effective time of the merger will be entitled to receive $15 in cash for each share held, representing a 22% or $2.74 per share premium over RCN's closing share price of $12.26 on Thursday. The offer price also represents a 43% premium over RCN's average closing share price during the past 30 trading days.
The deal is subject to receipt of stockholder approval, regulatory approvals, as well as satisfaction of other customary closing conditions. The approvals include the receipt of required consents and approvals of the Federal Communications Commission.
Meanwhile, RCN has been permitted to solicit additional third-party offers over the next 40 days until April 14, 2010, which it does not intend to disclose until its boards decision on the offers.
RCN noted that the deal is not contingent on financing. However, the deal is being financed by SunTrust Robinson Humphrey, Inc., GE Capital, Societe Generale, and certain of their affiliates through a fully committed financing with a combination of equity to be invested by ABRY and debt financing.
For RCN, Deutsche Bank Securities Inc. and Waller Capital Partners, LLC acted as financial advisers, and Jenner & Block LLP acted as counsel. SunTrust Robinson Humphrey acted as exclusive financial adviser to ABRY and will also serve as Left Lead Joint Bookrunner and Administrative Agent for the debt financing. GE Capital Markets and SG Americas Securities will also act as Joint Bookrunners for the debt financing. Edwards Angell Palmer & Dodge LLP acted as counsel to ABRY Partners.
In its latest quarterly results, RCN reported back in November a net loss of $5.7 million for the third quarter, narrower than $14.7 million in the year-ago quarter, reflecting lower expenses as well as a total quarterly revenue growth of 3% to $192 million from $187 million in the third quarter of fiscal 2008.
RCN, which has reported 14 consecutive quarterly net losses, and only one profitable quarter in the last five years, is scheduled to report financial results for the fourth quarter on Tuesday, March 9, 2010, before the market opens. Analysts are expecting the company to report a loss of $0.18 for the fourth quarter, on quarterly revenues of $191.85 million.
Meanwhile, RCN has canceled a previously scheduled conference call to discuss the fourth-quarter performance as a result of this deal.
After hitting a 52-week high of $15.11 in early trades in Friday's regular trading session, RCNI is currently trading at $15.05, up $2.79 or 22.76% on a volume of 7.76 million shares, sharply higher that the three-month average volume of 0.10 million shares.
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