Charter to Buy Optimum West for $1.63 Billion
Charter Communications Inc. agreed to buy Cablevision Systems Corp.’s Optimum West for $1.63 billion in cash, gaining a regional cable provider in the western U.S.
The price represents a multiple of 8.9 times Optimum West’s third-quarter 2012 annualized earnings before interest, taxes, depreciation and amortization, Charter said yesterday in a statement.
Charter won out over peers such as Time Warner Cable Inc. and Suddenlink Communications, which also made offers for the business, according to people close to the situation. Charter Chief Executive Officer Tom Rutledge is also familiar with Optimum West, which provides cable services to states such as Colorado and Utah. He pushed Cablevision to buy the business in 2010 when he was Cablevision’s chief operating officer.
“Charter is an educated buyer, because the CEO purchased the property for Cablevision, but in the near term, this is more positive for Cablevision,” said Frank Louthan, an analyst at Raymond James & Co. in Atlanta. “This is a transaction where there aren’t a lot of synergies because Charter is acquiring what became a well-run property.”
Louthan rates Cablevision’s stock outperform and Charter’s market perform.
Cablevision rose 0.3 percent to $15.22 at 9:31 a.m. in New York. Shares rose 5.6 percent yesterday after Bloomberg News first reported the deal, the largest one-day gain since July 19. Charter rose 0.7 percent to $81.22 today.
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In Optimum West, Charter gains more than 360,000 customers in Montana, Wyoming, Colorado and Utah. Cablevision bought the unit, previously known as Bresnan Broadband Holdings LLC, more than two years ago from Providence Equity Partners Inc. for $1.37 billion.
“Optimum West is an ideal fit for Charter,” Rutledge said in the statement. “We anticipate an efficient integration process.”
The transaction further expands Charter’s U.S. reach. The St. Louis-based operator already provides service to about 5.2 million customers in 25 states.
Selling the business allows Cablevision to concentrate on the New York area, where most of its customers reside. Cablevision serves about 3 million subscribers in New York, New Jersey, Connecticut and parts of Pennsylvania. The Bethpage, New York-based company began exploring a sale of the Bresnan business after several acquisitions of cable systems were announced last year at favorable prices, compared to the value of publicly traded cable companies’ shares.
“We are proud of the value we created in the Optimum West properties,” Cablevision CEO James Dolan said in the statement. “We made strategic investments in the cable system and significantly enhanced the network.”
The transaction is expected to close in the third quarter of 2013, the companies said. Charter will fund the acquisition with $1.5 billion in debt. Credit Suisse Group AG and Goldman Sachs Group Inc. provided financing and advised Charter on the deal.
Citigroup Inc. and JPMorgan Chase & Co. acted as co-lead advisers to Cablevision. Bank of America Corp.’s Merrill Lynch unit and Guggenheim Securities LLC also provided financial advice. Sullivan & Cromwell LLP acted as legal counsel to Cablevision.
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