Knology Inc. (KNOL), the cable company with customers mainly in the southeastern U.S., agreed to be bought by closely held cable operator WideOpenWest LLC for about $750 million.
Knology investors will receive $19.75 a share in cash, according to a statement from the companies today. That’s 9.4 percent more than Knology’s closing share price yesterday. The total transaction value is $1.5 billion, including debt.
The acquisition increases WideOpenWest’s customer base and will help give the operator more leverage in programming contract discussions with content providers. Englewood, Colorado-based WideOpenWest, or WOW!, was acquired by New York- based private equity firm Avista Capital Partners in 2006. The company provides cable, broadband and landline phone service to customers in Indiana, Illinois, Ohio and Michigan.
Knology jumped 7.5 percent to $19.40 at the close in New York. The shares have gained 38 percent in the past 12 months.
Knology, based in West Point, Georgia, and WOW will together have more than 800,000 customers. Knology has users in nine states including Tennessee, Alabama and Kansas. The company had sales of $518.6 million last year, up 13 percent from a year earlier.
Throwing Off Cash
WOW is paying about $1,875 per customer relationship, or so-called primary service unit, which accounts for any Internet, phone or TV subscription. Time Warner Cable Inc. (TWC) and Cablevision Systems Corp. (CVC) agreed to pay about $2,000 per primary service unit for Insight Communications Co. and Bresnan Communications LLC, the two most recent deals for cable providers over $1 billion, according to data from ISI Group.
Still, the price is a premium to how the largest U.S. cable companies trade, said Judah Rifkin, an analyst at ISI Group in New York. Comcast Corp. trades at about $1,790 per customer relationship and Time Warner Cable at $1,618, he said.
“Private equity continues to love the free cash flow that cable throws off,” said Paul Sweeney, an analyst at Bloomberg Industries. “An interesting disconnect remains -- private market values generally remain above public multiples.”
Knology’s stock jumped as much as 22 percent on Feb. 28 when the Wall Street Journal reported the company was shopping itself to buyers.
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