Just four months after finalizing a deal to take a minority equity stake in cable operator Hargray Communications, Cable One said it will buy the remaining interest in the company in a transaction that values the operator at $2.2 billion.
In October, Cable One closed a deal where it swapped its systems in Anniston, Alabama for a 15% equity stake in Hargray. The most recent deal, a mix of cash, equity and debt financing, is expected to be completed by the second quarter. In a press release, Cable One said the deal will give it an expanded presence in the Southeastern market -- Hargray operates in 14 locations across Alabama, Florida, Georgia and South Carolina -- and allows it to tap into Hargray’s fiber expertise.
“We look forward to further partnering with Hargray to extend our presence in the Southeast through Hargray’s fast-growing markets, like-minded strategy, and commitment to providing fast and reliable internet service to rural markets,” Cable One CEO Julie Laulis said in a press release. “This transaction will also serve as a potential platform for future organic and inorganic growth in the region as we look to continue to expand our footprint.”
According to Cable One, Hargray generated about $128 million in annualized Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA, a measure of cash flow) on an annualized basis for the quarter ended Dec. 31. Cable One said it expects to realize about $45 million in annual run-rate synergies within three years of the close of the deal.
Cable One has been an aggressive buyer of properties over the past few years. In October it said it would buy Mega Broadband Investments, parent of Vyve Broadband, for about $547.1 million. The most recent deal would be its sixth transaction since 2017, when it purchased New Wave Communications for $735 million.
“Cable One and Hargray have remarkably similar cultures, starting with each company’s focus on delighting its customers," said Hargray chairman and CEO Michael Gottdenker in a press release. "Having led Hargray for nearly 14 years, and having gotten to know Cable One well over the past few years, I am excited about this transaction and am confident that our colleagues, customers, and communities will continue to thrive under Cable One’s ownership.”
Hargray is owned by the Pritzker Organization, the merchant bank for the Tom Pritzker family. Tom Pritzker is also executive chairman of Hyatt Hotels Corp. Other investors in Hargray include Stephens Capital Partners, Redwood Capital Investments, WaveDivision Capital, and management.
The purchase price represents a multiple of about 17.2 times Hargrave’s annualized EBITDA, and 12.7 times cash flow assuming the synergies are realized immediately.
Cable One said it plans to finance the transaction with a combination of cash, its revolving credit facility and the issuance of new equity. The company said it has received a $900 million bridge loan from J.P. Morgan and Credit Suisse to finance a portion of the deal.
Cable One intends to finance the transaction with a combination of existing cash resources, revolving credit facility capacity, and proceeds from new indebtedness and/or equity capital. Cable One has received $900 million of definitive bridge loan commitments from J.P. Morgan and Credit Suisse to finance a portion of the purchase price.
Credit Suisse acted as lead financial advisor to Cable One, and J.P. Morgan also acted as financial advisor to Cable One. Cravath, Swaine & Moore LLP acted as legal advisor to Cable One on this transaction.
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