SusCom Is on the Block

Susquehanna Pfaltzgraff Co., parent of top-20 MSO and radio operator Susquehanna Media Co., has hired UBS Securities LLC to explore a potential sale of its media business, the company said in a terse filing with the Securities and Exchange Commission Wednesday.

Susquehanna Communications is the 17th-largest MSO, operating nine systems with about 233,100 subscribers in Pennsylvania, New York, Mississippi, Maine, Illinois and Indiana, according to SEC filings. Its largest system is in York, Pa., with about 90,000 customers.

The MSO is known as a progressive independent, having pioneered interactive-TV games (currently via Buzztime Entertainment Inc.) and electronic commerce, among other cable innovations.

SusCom is also the largest privately held radio-station operator in the country, owning 33.

A source familiar with the process said retired Susquehanna Media CEO Peter Brubaker was planning a bid for the media businesses, including cable. Brubaker did not return a phone call for comment at press time.

According to company financial statements, cable revenue in 2004 was $178.8 million, up 30% from $137.2 million in the prior year. Radio revenue was about $238 million.

With cable systems 95% rebuilt to 750-megahertz capacity or better, SusCom should attract a lot of attention, especially from private-equity firms that have been circling the cable industry for months.

SusCom bought about 29,000 cable customers in Carmel, N.Y., last year from RCN Corp. for $120.6 million (about $4,000 per subscriber) in what was one of the richest deals of that year on a per-subscriber-valuation basis.

In an interview, Brubaker said that while he has not launched an official bid, he would be interested in making an offer for the company. “If there is an opportunity, I would be interested in trying to do something for both radio and cable,” he said.

While he added that finding backers would be “the easy part,” he declined to comment on any possible discussions.

“I really can’t comment on the status of those discussions, but there is no question that this would be a relatively financeable deal,” Brubaker said.

Brubaker retired Feb. 11 as president and CEO of Susquehanna Media, but he retains an office at its York, Pa., headquarters and has a consulting arrangement with the company.

“This has been a difficult and carefully considered step," Susquehanna Pfaltzgraff chairman Louis J. Appell Jr. said in a prepared statement.

“The radio and cable operations and Pfaltzgraff have strong reputations and management teams, as well as hard-working, loyal employees,” Appell added. “However, the passage of time has had a major impact on corporate and family circumstances, including the absence of a member of the younger generation inclined to assume a leading management role. Consequently, the family shareholders concluded that we have a responsibility to examine the potential strategic options for our businesses.”

He continued, “At this time, we have decided to initiate a sale process, at the conclusion of which we will determine if the offers yield a compelling value to our shareholders. Until then, our focus is on pursuing the business and growth plans we have established for 2005. Once buyers are identified and definitive agreements are negotiated, we will work to ensure smooth transitions to new ownership.”