Charter System Sales Official

Charter Communications Inc. made it official Tuesday, announcing two deals to sell systems in West Virginia and Virginia with about 240,000 subscribers to Cebridge Connections and systems with 76,000 customers in Kentucky and Illinois to NewWave Communications for a grand total of $896 million.

Charter wouldn’t break out the pricing for the deals separately, but sources in the cable investment-banking community said Cebridge -- headed by former Charter CEO and current Cequel III LLC president Jerry Kent -- will pay $750 million-$800 million for the properties.

NewWave -- headed by cable veterans Jim and Tom Gleason -- was expected to pay $100 million-$150 million for the Kentucky and Illinois properties.

Charter said proceeds of the sale would be used to increase liquidity and for reinvestment for future growth. The deals are expected to close by the third quarter of this year.

Daniels & Associates and JPMorgan Securities Inc. acted as advisers to Charter on both deals. New York-based Waller Capital Corp. served as adviser to NewWave.

As a whole, the deals valued the systems at about $2,800 per subscriber. However, the more attractive West Virginia and Virginia systems likely brought in a higher valuation (about $3,100 per subscriber, according to UBS Warburg LLC cable analyst Aryeh Bourkoff), with the Kentucky and Illinois systems garnering about $2,000 per customer.

In a prepared statement, Kent said it was good to do business again with his old company.

“We are very pleased to enter into this agreement with our former company and to have the opportunity to once again serve these communities,” Kent said. “One of our current managers [Dave Bach, Cebridge’s regional vice president of operations for the Atlantic region] has actually run these systems. In fact, he previously built the team that is still largely in place there today. So we know these properties are well-managed, not to mention a great matchup with our existing operations in West Virginia. All told, this agreement will further advance our goals of building a major U.S. cable operator and diversifying the mix of systems we own and operate.”

Cebridge currently has about 400,000 subscribers in 20 states. With this deal, and an agreement reached late last year to buy 940,000 subscribers from Cox Communications Inc. (scheduled to close in late April or early May), Cebridge will vault into the No. 8 spot among the top 10 cable-systems operators in the country, with 1.5 million subscribers.

Charter made the announcement in conjunction with the release of its fourth-quarter results. Revenue for the quarter was up 5.2% and cash flow was down 2.3%. Charter also lost about 21,800 basic subscribers in the period but added 76,400 high-speed-Internet subscribers, 47,200 digital customers and 31,600 telephone customers.

Charter said it will continue to focus on growing its telephone base -- the product is currently available to 3 million homes in its footprint, and it will expand to 6 million-8 million homes by the end of the year.