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Liberty Global, Searchlight Buy Choice TV

Liberty Global and Searchlight Capital have paired up to acquire Choice Cable TV, the second largest cable operator in Puerto Rico, in a deal valued at about $272.5 million.

After the deal closes, Choice will be combined with LGI's Liberty Cablevision, the largest cable operator on the island. Liberty Global will own 60% of the combined operation while Searchlight, headed by Charter Communications chairman Eric Zinterhofer, will own 40% of the company.

According to Liberty Global, Choice Cable passes about 345,000 homes and has about 154,000 revenue generating units. The combined companies will reach about 80% of the cable market in Puerto Rico, have revenue of more than $380 million and serve about 700,000 RGUs. It also will be the first new asset in Liberty Global's planned tracking stock, Liberty Latin American and Caribbean Group (LiLAC). That tracker is expected to debut early next year.

The Choice Cable transaction will build upon our 2012 acquisition of OneLink and will complete cable consolidation on the island of Puerto Rico. Going forward, our market-leading bundles and commitment to network investment and innovation will meaningfully enhance the products and services available to Choice customers," said Liberty Global CEO Mike Fries in a statement.

Zinterhofer , a former senior partner at Apollo Management, was named Charter chairman in 2009, shortly after the company emerged from bankruptcy protection. He helped form Searchlight with several former executives from Apollo, KKR and the Ontario Teachers’ Pension Plan in 20xx. Searchlight has been an active investor in the cable industry – on Dec. 4 it invested about $75 million in Alaskan cable and telecom service provider GCI.

Liberty Global began beefing up its presence in Puerto Rico in 2012 with the purchase of One Link Communications from private equity firms MidOcean and Crestview Partners. Liberty Global combined OneLink with its existing operation there – Liberty Cablevision and Searchlight was in on that deal, ending up with 40% of the combined company.

"We are excited about the opportunity to bring next-generation video capability and enhanced broadband services to Choice’s customers," Zinterhofer said in a statement. "Furthermore, through the creation of an island-wide cable operator, there are significant opportunities to drive scale benefits and develop incremental residential and commercial business opportunities in Puerto Rico.”

This transaction values Choice Cable at an enterprise value before transaction costs of about $272.5 million, or about 6.1 times Choice’s 2015 estimated operating cash flow.

The purchase price is expected to be funded mainly through incremental debt borrowings at the combined Puerto Rican business. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the first half of 2015. LionTree Advisors acted as financial advisor in the transaction.