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Wave Broadband Owners Explore Sale

Provate equity groups Oak Hill Capital Management and GI Partners have reportedly hired bankers to explore a possible sale of Seattle-based Wave Broadband, seeking as much as $2 billion in a deal.

Wave Broadband has about 138,000 video customers in the Northwest and in the past several years has focused on high-speed data growth. The company, which overbuilds Comcast in a small part of the San Francisco market, also has operations in Washington and Oregon, including the Portland and Seattle areas. Wave has been snapping up ISPs and fiber businesses in the past several months in an effort to bolster its Gigabit data offerings.

News of the auction was first reported by Reuters, which said the private equity players had hired UBS to conduct an auction for Wave.

Wave declined comment.

According to sources familiar with the process, first round bids for Wave are due tomorrow (April 11) and are expected to include a wide swath of private equity and other financial bidders.

Sources in the financial community said that Oak Hill and GI Partners want the process to wrap up quickly – some said they are hoping a deal could be signed in May. Others added that the potential $2 billion price tag isn’t as rich as it seems, given multiples of other recent deals – Cable One’s purchase of NewWave Communications (an estimated 11.5 times cash flow multiple) being the biggest and others in the 8.5 times cash flow range. Wave has an estimated $200 million in cash flow in its residential business, which would mean a $2 billion purchase would have a 10-times multiple.

Those same sources said buyers are looking to take advantage of the still-favorable debt markets, which could be used to finance a major portion of any deal.      

Wave has been active in the deal market too. The company has been focusing on the broadband side of the business for years and last week purchased Seattle-based ISP Cascadelink last week for an undisclosed sum and in September raised about $125 million to continue an ambitious fiber buildout geared toward serving enterprise customers. The company had previously raised $130 million for the fiber build.

Oak Hill and GI Partners teamed up with Wave management – including founder and CEO Steve Weed – to buyout long time backer Sandler Capital Management in 2012 in a deal some valued at about $950 million.

Wave is being shopped at a time when consolidation in the cable business is beginning to heat up. Last week Liberty Interactive agreed to purchase Alaskan Cable operator General Communication Inc. and in late March overbuilder Wide Open West filed preliminary documents for an initial public offering that could raise as much as $750 million.  In August, private equity group TPG Capital purchased Grande Communications and RCN Corp. in a deal valued at $2.25 billion.