Return Of The Deal

After a lengthy dry spell, activity on the cable
mergers-and-acquisitions front has been increasing
at a surprising rate, with a growing
number of systems on the block so far
this year.

Executives in the cable M&A community
say at least 10 systems are either formally on the block or
have officially been pulled off the market, but are still being

Help has come from a resurgence of debt markets —
both for bonds and for bank debt. Moody’s Investors Service
senior vice president Neil Begley said cable bond
deals are still being done for yields of less than 7% (compared
to upwards of 9% a few years ago) and bank loans
can be had for LIBOR plus 300 basis points. In other words,
money is relatively cheap and available.


Availability of money, the strong operating history of the cable
industry and stimulation from other deals getting done
are all spurring M&A activity, Begley said.

Concern over possible increases in interest rates also is
encouraging some new entrants to get into deals. “The idea
is that you had better jump through and get these long-term
rates now, or forever hold your peace.”

Operators looking to lower their tax burden can look to
acquisitions for some relief. “If that multiple didn’t look so
great before, when I factor in the tax savings, maybe it meets
my hurdle rate,” Begley said. “I ultimately think that was
behind the Bresnan [Communications sale to] Cablevision
[Systems], and other companies are looking at it the same
way. That all spells the prospects of a healthy deal market.”

RBC Capital Markets Communications, Media &
Entertainment Group co-head Brian Deevy said the
current climate is the best in five years. “There is private-
equity interest. The banks are willing to do things.
It’s very encouraging.”

Also helping private-equity interest is the availability
of strong cable management to run systems. ABRY tapped
former Simmons Communications head Steve Simmons to
run RCN and possibly expand. Former Time Warner Cable
chief operating officer Landel Hobbs is said to be open to
the right opportunity with a financial player.


Suddenlink Communications senior vice president of corporate
development Heather Wood said these factors are
behind the renewed deal-making:

• Financial markets have grown more accommodating;

• Cable has shown it can perform in harsh economic climates
(Suddenlink had a compounded annual cash-flow
growth rate of 11.7% through the heart of the downturn);

• Private-equity players are looking to put their cash to

“In addition, a number of potential sellers stayed on the
sidelines until the financial markets, the economy, and
cable’s prospects improved. We’re now seeing that backlog
come to market,” Wood said.

Here is a look at the top 10 systems that sources have
identified as available at the right price.

1. Insight Communications

Subscribers: 691,700

Owners: Carlyle Group; Crestview/MidOcean

Locations: Indiana, Ohio, Kentucky

Background: Insight pulled back its auction in 2008,
after the credit markets collapsed, and has been
chugging along nicely ever since. Long considered
one of the top small operators in the country, at the
end of 2010 Insight had 23% phone penetration,
39% high-speed data penetration and 86% digital
cable penetration in its markets. In March, Insight
hired Bank of America Merrill Lynch and UBS to
handle its auction, which it hopes will fetch between
$3.5 billion and $4 billion. That hefty price could
come down — it represents about 11 times cash
flow, three multiple turns higher than the biggest
cable deal last year — and was one reason sources
said Time Warner Cable, the most logical buyer, has
reportedly backed out of the auction. Other possible
suitors include Cablevision, Charter Communications
and a host of private-equity groups. Also possible:
42% owner Crestview/MidOcean, including
former cable mogul Jeffrey Marcus, could buy out
42% owner Carlyle. Books on the Insight systems
went out last week with early bids due by the middle
of this month, according to reports.

2. Charter Communications’

Los Angeles, Fort Worth systems

Subscribers: 551,000 (Los Angeles); 178,000
(Fort Worth)

Owner: Charter Communications

Background: After an attempted swap with Time
Warner Cable for the latter’s Wisconsin cluster
fell through, Charter decided to test the deal
waters for Los Angeles — long thought to be
deal fodder — and Fort Worth, Texas, hiring Goldman
Sachs and Citigroup to gauge interest. Los
Angeles (including Long Beach, Calif., Charter’s
first all-digital market; San Luis Obispo, Lompoc,
Chico and Redding) had been considered to be
one of the MSO’s premiere systems. Fort Worth,
which the company attempted to swap along with
other systems with AT&T Broadband in 2000,
has also been a strong market. The logical buyer
is TWC, with 1.8 million customers in Los Angeles
and another 600,000 subscribers in Dallas.
Other possible suitors: Comcast, Cablevision
and private-equity players.

3. Wave Broadband

Subscribers: 320,000 RGUs

Owner: Sandler Capital

Locations: Washington State, Oregon,
Northern California

Background: Wave Broadband began
looking for a strategic partner last year
to help fund an expansion, but pulled its
systems off the market when it could not
reach the deal it wanted. Though still
officially off the block, there are still conversations
about the properties, mainly
because they are run so well. Wave was
formed in 2003 by former Millennium
Digital Media executive Steve Weed and
its main initial growth was through acquisitions.
The systems are primarily located
near existing Comcast properties.

4. Allegiance Communications

Subscribers: 50,000

Owner: The Wicks Group

Locations: Arkansas, Kansas, Missouri,
Oklahoma, Texas

Background: Wicks formed Allegiance in
2003 with from Buford Media, the small
market cable operator owned by long-time
industry executive Ben Hooks, and later
added on systems it bought from Charter
Communications in 2006.

5. NewWave Communications

Subscribers: 60,000

Owner: Pamlico Capital

Locations: Kentucky

Background: NewWave, based in Sikeston,
Mo., is run by cable pioneers the Gleason
family. It closed on a deal to purchase
Avenue Broadband (54,000 RGUs in Illinois
and Indiana) for $50.4 million earlier this
year. Possible suitors include privateequity
companies, smaller operators and
strategic players.

6. Broadstripe Communications

Subscribers: 80,000 to 90,000

Owner: Highland Capital

Locations: Maryland, Michigan, Washington,

Background: Broadstripe, formerly Millennium
Digital Media, filed for Chapter 11
bankruptcy protection in January 2009 and
hired New York telecom investment banker
DH Capital in May 2009 to place a value on
the company, according to bankrupt
cy-court documents. In August 2009, DH
Capital’s role grew into brokering the sale
of 14 Broadstripe systems in Washington
state and locating exit financing for
Broadstripe’s owner, Highland Capital.

7. En-Touch Communications

Subscribers: 17,000

Owner: Boston Ventures

Location: Houston

Background: Boston Ventures acquired
En-Touch, which offers cable service in
high-end condominiums and masterplanned
communities in the Houston
area, in 2006. Founded in 1996, En-Touch
offers broadband, telephone, cable TV
and security-alarm monitoring services. A
subsidiary, En-Touch Energy, also provides
electricity services.

8. OneLink Communications

Subscribers: 140,000

Owner: Crestview/MidOcean Partners

Locations: San Juan, Bayamon,
Guaynabo, Trujillo Alto, Carolina, Toa
Baja, Toa Alta and Catano, Puerto Rico

Background: The largest cable operator in
Puerto Rico, OneLink was formerly owned
by Adelphia Communications, which sold it
as part of its overall bankruptcy in 2005.
OneLink offers high-speed Internet, telephony
and digital cable services.

9. Vision Communications

Subscribers: About 50,000

Owner: Boston Ventures

Locations: Louisiana

Background: Vision has been the incumbent
local-exchange carrier (ILEC) in Lafourche
Parish, La., since 1945. In 2003,
it purchased the cable company that overlaps
its local telecom network. Through its
ILEC and cable TV facilities, the company
delivers high-speed Internet (both DSL
and cable modems), digital and HD video,
residential voice, home-security monitoring,
and commercial voice and data service.

10. US Cable

Subscribers: 150,000 RGUs

Owners: Stephen Myers, Michael Anderson,

Locations: Minnesota, Missouri, Colorado,
Texas, New Mexico

Background: US Cable was formed in 1975
by Myers and Anderson, two former realestate
partners, and quickly expanded by
acquiring systems throughout the country.
In the 1990s, US Cable partnered
with Tele-Communications Inc., relinquishing
a 48% interest in the company
in exchange for 23,500 TCI customers.
That stake transferred to AT&T Broadband
after TCI sold out in 1999 and
fell into Comcast’s hands after its 2002
purchase of AT&T Broadband.

MUL_cover Story_5_9_11