Knology’s proposed sale to WideOpenWest
could net some top executives at the overbuilder awards that
dwarf their annual salaries, according to Securities & Exchange
Commission documents filed earlier this month.
After a two-month auction process, Knology agreed on
April 18 to be purchased by fellow overbuilder WideOpen-
West, for $19.75 per share. The deal was valued at about $1.5
billion and will boost WOW’s subscriber base to more than
800,000 customers passing 2.8 million homes in 13 states.
The deal was approved by Knology’s board of directors
on April 18, but still needs to pass muster with its public
shareholders. A special meeting of shareholders will be
held at a later date, after which, if the deal is approved,
Knology will no longer be publicly traded.
The price represented a 9% premium to Knology shares
on April 17. Prior to the announcement of the transaction,
Knology stock had been up about 36% for the year,
almost entirely on deal speculation. Before a Wall Street
Journal article on Feb. 29 stated that Knology was looking
for buyers, the stock had been priced at $15.81 per share.
WideOpenWest is led by industry veteran Colleen
Abdoulah and has a management team that has been in
place for several years.
The payouts are part of a change-of-control clause in
each executive’s compensation deal, highly common
throughout publicly traded companies. The executives
only receive the payouts in the event their employment is
terminated within 24 months of the closing of the merger,
according to a proxy statement filed earlier this month.
According to the proxy statement , Knology chairman
and CEO Rodger Johnson stands to reap about $14.5 million
in cash and equity awards if the deal goes through.
Johnson received $1.75 million in compensation in 2010
(the company has not yet released 2011 compensation figures).
Todd Holt, president, stands to receive $5.4 million
in cash and equity (seven times his 2010 comp); executive
vice president of operations Bret McCants could get $4.9
million (six times his 2010 compensation); and CFO Robert
Mills, $1.6 million.
Chad Wachter, vice president, general counsel and secretary,
stands to receive $1.36 million (more than double
his 2010 pay), and VP of engineering and chief technology
officer John Treece gets $1.37 million (more than three
times his 2010 compensation).
In the first quarter Knology reported lighter than expected
revenue growth of 3.3% to $132.1 million, and cash
flow dipped 5% to $44.7 million. Knology lost 1,105 video
customers in the period, missing consensus estimates, but
voice net additions (2,573) and high-speed data net adds
(4,777) beat analysts’ expectations.
In a research note, Miller
Tabak media analyst David
Joyce, who is dropping coverage
of the company since
it will no longer be public,
wrote that he expects the
deal will close in the September-
October time frame.
He noted that the two companies
have ample incentive
to close the deal as soon
as possible: Knology would
have to pay WOW a $25 million
termination fee if it can’t
close the transaction by Oct.
18, and if WOW scuttles the
deal, it would have to pony
up a termination fee of $65
million.
