Millennium Digital Media, the St. Louis-based cable operator, has reached an agreement to sell about 70,000 subscribers in Washington, Oregon and Michigan to Wave Division Holdings LLC for an undisclosed sum.
Wave Division president Steve Weed confirmed the sale, saying the deal could close as soon as June 30. While terms of the deal were not disclosed, several cable investment bankers who asked not to be named valued the deal at between $150 million and $200 million. That would value the Washington, Oregon and Michigan systems at a fairly hefty $2,100 to $2,800 per subscriber.
WAVE HAS 89K NOW
Wave Division currently has about 89,000 subscribers in the Northwest and on the West Coast. The Northwest systems are in areas surrounding Seattle and Portland, Ore. , while the central systems surround Lansing, Mich. Portions of the Seattle market are an overbuild of Comcast Corp.
Weed said that the systems will require some upgrades — the central systems are currently at 450 Mehahertz to 550 MHz capacity and only about half of the Northwest systems have high-speed Internet access.
“These are fixer-uppers,” Weed said of the Millennium systems. “Our plan in the Northwest is to purchase them, interconnect and rebuild them as much as we can and launch all of the new advanced services.”
Weed said for example, that some of the Northwest systems currently have between 20 and 25 headends.
“A lot of it can be interconnected to the other systems we’ve purchased,” Weed said.
Weed added that the advanced products would likely be rolled out about 12 months after the deal is closed.
Millennium has had these systems on the block for more than a year. Denver-based cable investment banker Daniels & Associates was said to be representing Millennium on the deal.
The buy is sort of a homecoming for Weed, who ran the Seattle system from Millennium for about four years before breaking out on his own in 2002.
Weed has been an aggressive buyer since forming Wave, spending about $161 million to purchase 65,000 subscribers in several deals between 2003 and 2005.
One system that won’t be included in the most recent deal is Millennium’s Anne Arundel County, Md., property, which competes in that market with Comcast.
That system, in a Baltimore suburb, was the first acquired by Millennium Digital, in 1998. At the time it competed against Jones Intercable before Jones sold out to Comcast.
Millennium Digital senior vice president of marketing Peter Smith said that the Anne Arundel system will continue to be run by Millennium. The Anne Arundel system has about 44,000 basic customers.
“As a normal part of our ongoing business Millennium looks at all of its options — purchases, sales, recapitalization, acquisitions, mergers, etc.,” Smith said of the decision to sell the central and Northwest markets. “We intend to remain in the cable TV business for the foreseeable future.”
ON BLOCK SINCE JUNE
Books on the Millennium properties went out on June 1, according to people in the cable investment community familiar with the company. At the time, these same executives said that Millennium was asking for as much as $460 million for all of its systems, including Anne Arundel.
According to cable industry executives that have seen the Millennium books, the properties had 2004 revenue of about $101 million and cash flow of $41 million. Average monthly revenue per subscriber was about $71, the cable executives said. Millennium is backed by Stamford, Conn.-based private equity firm TSG Capital Group LLC. Wave Broadband is backed by Sandler Capital Management.
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