PURCHASE, N.Y. – Cablevision Systems Corp., the fifth-largest U.S. cable operator, agreed to buy Bresnan Communications Co. from Providence Equity Partners Inc. for $1.37 billion to expand in the western United States.
Bethpage, N.Y.-based Cablevision will add Bresnan’s more than 300,000 cable and broadband subscribers in Colorado, Montana, Wyoming and Utah, the companies said Monday. Cablevision also announced a $500 million share buyback program.
Acquiring Bresnan will give Cablevision a bigger slice of the burgeoning market for high-speed Internet services, where revenue is expected to rise to $210 billion globally in 2014 from $164 billion in 2009, according to ABI Research in Oyster Bay, N.Y. Cablevision Chief Operating Officer Tom Rutledge will oversee the Bresnan properties.
“Cable is what Cablevision does best, and this acquisition is relatively low risk given Cablevision’s experience in the industry,” Chris Marangi, an analyst with Gabelli & Co. Inc. in Rye, N.Y., said in an interview. “Bresnan has a relatively small group of subscribers, is well clustered with advanced systems, and will be relatively easy to manage for Rutledge and his team.”
Cablevision will buy Bresnan through a newly-formed subsidiary with standalone financing, the companies said. The subsidiary will be given no more than $400 million by Cablevision and will issue about $1 billion in debt to fund the transaction.
“The way the deal is structured, as a non-recourse entity, underscores that the cash flows coming out of the New York systems are unaffected and robust and are being used to fund the buyback,” said Marangi.
Competitive Bidding
Cablevision competed in the bidding against TPG Capital, BC Partners Ltd., Suddenlink Communications and Ascent Media Corp., said one person close to the negotiations who declined to be identified because the details aren’t public. John Malone, chairman of Liberty Media LLC, owns 30.3 percent of the voting shares of Ascent Media.
TPG spokesman Owen Blicksilver and BC Partners spokeswoman Martha Kelly both declined to comment.
Providence hired Credit Suisse Group AG and UBS AG to sell the company. Cablevision hired Citigroup Inc. as its lead financial adviser, along with Bank of America Merrill Lynch and Guggenheim Securities LLC. Comcast Corp. agreed to sell its 30 percent stake in Bresnan as part of the deal, said D’Arcy Rudnay, a spokeswoman for Comcast.
Midwestern Roots
Bresnan was founded in 1984 by William J. Bresnan, who was born in Mankato, Minn., according to the company’s website. Bresnan initially operated cable systems both in the Upper Midwest and internationally, before focusing on the Rocky Mountain states, the website said.
Bresnan, who repurchased the company in 2003 for $525 million with backing from Providence Equity, died last year. Jeffrey DeMond, a longtime executive who served as chief financial officer and president, has been CEO since last year.
The purchase expands the customer base of Cablevision from the New York City region into the western U.S. market, which is attractive because it has lower pay-TV penetration rates than Cablevision’s home market and no competition from Verizon Communications Inc.’s fiber-optic TV service.
Garden Spinoff
CEO Jim Dolan, whose family controls Cablevision, spun off the company’s Madison Square Garden unit this year to concentrate on the more profitable cable assets. On the company’s May 6 conference call, Gregg Seibert, an executive vice president, said the company’s first priority was to use its free cash flow to invest in and expand the business.
Providence Equity is also trying to sell Metro-Goldwyn-Mayer Inc. as the Los Angeles-based film studio, which Providence and other investors took private for $5 billion in 2005, struggles to repay $3.7 billion in debt. TPG Capital, Sony Corp. and Comcast Corp. also participated in that purchase.
Cablevision fell as much as 85 cents, or 3.6 percent, to $22.55 in early U.S. trading. The stock had gained 9.8 percent this year before today.
Additional information is available at provequity.com.
