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BC Partners, Kent to Buy Suddenlink for $6.6 Billion

Continuing what has been a busy week on the mergers and acquisitions front, private equity firm BC Partners has teamed up with Suddenlink Communications management, led by chairman and CEO Jerry Kent, to purchase the small-market MSO for $6.6 billion.

The deal, which encompasses some $2 billion in cash, $4.6 billion in assumed debt and also involves Canada Pension Plan Investment Board, Canada's largest pension fund, is expected to close in the fourth quarter.

The Suddenlink transaction follows news that Canadian MSO Cogeco Cable will cross the border into the U.S. when it finalizes its purchase of Atlantic Broadband for $1.36 billion.

Suddenlink is the seventh largest MSO in the country with about 1.4 million customers in six states. Kent formed the company -- originally Cequel III and later Cebridge Connections -- in 2002 after leaving Charter Communications, a company he co-founded, in 2001.

The purchase price represents a multiple of about 8.6 times annualized first quarter cash flow and includes $1.985 billion of equity to be invested by BC Partners, CPPIB and certain members of Suddenlink's management, plus incremental debt of $500 million and the assumption of $4.1 billion in existing debt.

Proceeds will be used to to acquire the ownership stake of all holders of Suddenlink's preferred and common equity, led by Goldman Sachs Capital Partners and including Quadrangle and Oaktree Capital Management
Suddenlink operates primarily in Texas, West Virginia, North Carolina, Oklahoma, Arkansas and Louisiana and has a reputation as one of the strongest independent operators in the country. The MSO is close to completing a $350 million upgrade -- dubbed Project Imagine -- and has been an aggressive buyer of cable systems.

Its most recent acquisition was NPG Cable, an 83,000-subscriber MSO with systems in Missouri, California and Arizona, for $350 million.

In the 12 months ending March 31, it generated $1.96 billion in revenue and $743 million in adjusted EBITDA, pro forma for acquisitions, divestitures, and non-recurring expenses. In the first quarter, revenue grew 6.2% to $505 million and adjusted EBITDA rose 6.6% to $181.8 million.

"This agreement will allow us to continue to invest in our infrastructure, new technology, and most importantly, our people," Kent said in a statement. "We have 6,000 employees who are dedicated to providing a superior level of customer care, and who generate consistent, industry-leading operating results.

BC Partners is no stranger to the cable business. It owns an interest in Swedish cable company Com Hem and earlier helped in the formation of Unitymedia, the third largest cable operator in Europe. Unitymedia was acquired by Liberty Global in 2009,

"Cable is an industry we know well in both Europe and the United States, and epitomizes the defensive growth characteristics we typically seek in an investment," said BC Partners Co-Chairman and Managing Partner Raymond Svider in a statement. "Suddenlink is one of the most attractive cable companies in the U.S. today, with a world-class infrastructure and a dedication to providing customers with the very best offering and service. We are excited to be partnering with Jerry Kent and the high quality and experienced management team he has assembled. Jerry and his team have an enviable track record of delivering strong equity returns to shareholders, and we are looking forward to working with them to help continue growing Suddenlink and take it to the next level."

In connection with the acquisition, a newly formed subsidiary of the company has entered into a commitment letter with Credit Suisse for $500 million of senior unsecured bridge loans. The company expects to use the proceeds from such bridge loans or an equivalent amount of high-yield debt securities to fund a portion of the purchase price. In addition, the company will continue to be managed by Cequel III, LLC, pursuant to the management agreement.

LionTree Advisors, a division of EM Securities, and Goldman Sachs acted as financial advisers to Suddenlink in the transaction and Paul Hastings LLP and Seyfarth Shaw LLP acted as the MSO's legal advisers. Credit Suisse acted as financial adviser for BC Partners and CPPIB and ; Latham & Watkins LLP and Wachtell, Lipton, Rosen & Katz LLP served as the pair's legal advisers. CPPIB was also separately advised by Torys LLP. For existing equity holders, Fried, Frank, Harris, Shriver & Jacobson LLP acted as legal adviser.