WideOpenWest said Wednesday it has agreed to sell systems in five markets in two separate transactions to Astound Broadband and Atlantic Broadband for a combined $1.786 billion, using the proceeds of the sale to pay down debt and fund network expansion.
WOW will sell its Cleveland and Columbus, Ohio systems to Atlantic Broadband in a deal valued at $1.125 billion. Astound will receive WOW’s Anne Arundel, Maryland; Chicago and Evansville, Indiana systems for $661 million.
News of the deals, expected to close in the second half of 2021, sent WOW stock up 17% ($3.09 each) to $21.34 in early trading Wednesday (June 30)
Atlantic Broadband is part of Canadian telecom and cable operator Cogeco Communications. Last year it was the target of a hostile takeover bid from Altice USA, which with Canadian telecom giant Rogers Communications bid more than $8 billion for Cogeco assets. Cogeco, controlled by the Audet family trust, rejected those bids.
Astound broadband was created last year after private equity firm TPG sold its stakes in RCN, Grande Communications and Wave Broadband to Stonepeak Infrastructure Partners for $8.1 billion.
News of the deal comes about two weeks after WOW chief financial officer John Rego said at an industry conference that the company could sell off portions of its systems if it wanted to deleverage faster.
“If we wanted to think about deleveraging quicker [and] faster, we could think about selling a market or two of the 19 that we have,” Rego said at the Credit Suisse Virtual Communications conference on June 15. “We’ve done this before. We’ve bought them and we’ve sold them.”
At the time, Rego noted that deal multiples were rising, pointing to Astound's sale to Stonepeak and CableOne’s purchase of Hargray Communications, transactions that he sad were valued at around 12.5 times cash flow. According to WOW, its Atlantic Broadband and Astound deals are valued at about 11 times cash flow.
WOW said it would use the proceeds of the sale to pare down debt -- it estimates that its leverage ratio will fall from its current 5 times cash flow to 2.5 times after the deal closes. In addition, it will use some for the money to continue its ongoing edge-out program to expand its network in its service territory.
"We are pleased to reach these two agreements as WOW! takes a significant step toward accelerating our broadband-first growth strategy at a pivotal time in our industry," WOW CEO Teresa Elder said in a press release. "The substantial proceeds from these transactions reflect the attractiveness of our assets and the clear opportunity to expand our position as a trusted provider of reliable, accessible and fast broadband solutions. The divestiture of these markets will enable us to reduce our debt as we continue to execute our broadband-first strategy, including pursuing our Edge-out and greenfield strategies and expanding our commercial services."
WOW will continue to operate in 14 service areas in Alabama, Florida, Georgia, Michigan, South Carolina, and Tennessee. On a pro forma basis as of March 31, the company would have had about 532,000 total subscribers, and 506,000 high-speed data revenue generating units.
The company said it “anticipates some employees from each of the sold markets will remain with WOW, some may be integrated into Atlantic Broadband and Astound Broadband, and others may leave the business.”
BofA Securities is acting as financial advisor to WOW, and Wachtell, Lipton, Rosen & Katz as well as Honigman LLP are serving as legal counsel.
Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.
The smarter way to stay on top of the streaming and OTT industry. Sign up below.
Thank you for signing up to Next TV. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.