Insight Ready to Unwind
Deal Would Give Top Operator Comcast 680,000 Subs
By Mike Farrell -- Multichannel News, 4/1/2007 6:00:00 PM MT
Comcast is close to wrapping up a deal to unwind a partnership with Insight Communications that could bring half of Insight’s 1.3 million cable customers into its fold.
Comcast has owned 50% of Insight Midwest — a partnership that controls all of Insight’s 1.3 million customers — since 2002, when it acquired AT&T Broadband.
Comcast said two years ago it wanted to unwind the partnership to simplify its own structure. It gained the right to trigger a dissolution on Dec. 31, 2005.
Insight, which went private in a $720 million deal in 2005, has apparently been negotiating with Comcast since January. But according to cable executives familiar with those negotiations, the talks began to heat up recently.
| Snapshot |
|---|
| Insight Midwest |
| Source: Multichannel News |
| Owned by: Comcast (50%), Insight Communications (50%) |
| Total subscribers: 1.3 million |
| Locations: 680,000 in Northern Indiana and Illinois; 650,000 in Kentucky, Ohio and Indiana |
Executives familiar with both companies said a deal could be reached within a couple weeks. Insight CEO Michael Willner could not be reached for comment.
Comcast has had the option of unwinding the partnership by buying out Insight’s 50% stake for cash or agreeing to take a portion of Insight’s systems in a split.
According to industry executives familiar with the negotiations, the most likely scenario involves Comcast gaining control of systems in Northern Indiana and Illinois. Insight and its financial partner, The Carlyle Group, would take control of subscribers in Southern Indiana, Kentucky and Ohio.
But those same executives said that the actual assets exchanged could change as the deal comes closer to completion.
In its 10-K annual report filed March 27, Insight estimated the cash value of Comcast’s interest in the partnership is between $1.1 billion and $1.8 billion.
The Northern Indiana and Illinois systems make sense for Comcast because they are adjacent to its Chicago and suburban Indianapolis clusters.
According to Insight’s 10-K annual report, the company has about 680,000 customers in Northern Indiana and Illinois, including systems in Peoria, Champaign/Urbana, Decatur and Springfield in Illinois and in Lafayette, Richmond, Bloomington and Kokomo, Ind.
Insight’s Southern Indiana, Kentucky and Ohio systems have about 650,000 customers and include systems in Louisville and Lexington, Ky.; Columbus, Ohio; and Evansville, Ind.
Executives in the cable financial community said that, if a deal is done, it is likely that Carlyle will put the systems it retains on the block. Possible buyers include Time Warner Cable, which has large clusters in Ohio, Indiana and Kentucky.
The Insight partnership appears to be the last remaining joint venture Comcast has to unwind.
In 2006. Comcast exchanged a 21% interest in Time Warner Cable for systems with about 750,000 subscribers, part of its joint purchase of Adelphia Communications with Time Warner Inc.
Shortly after that deal closed on July 31, Comcast unwound its Texas Cable Partners and Kansas City Cable Partners ventures with Time Warner, gaining about 800,000 subscribers in Houston in exchange for its interest in roughly the same amount of customers in Kansas City, southwest Texas and New Mexico.
In May, Comcast bought out the 70% of Susquehanna Communications it didn’t already own for $540 million, picking up 230,000 cable customers.
In an August interview, Comcast co-chief financial officer Lawrence Smith said that the company would lean more toward taking subscribers in a split of the partnership rather than cash mainly for tax reasons. He said at the time that Comcast had no interest in buying out Insight’s 50% of the partnership.
“I don’t think they want that,” Smith said during that interview, speaking of Insight’s owners. “They’re a private company, and certainly, we would never do anything hostile with them.”
Insight’s 1.3 million subscribers are already fully attributed to Comcast under Federal Communications Commission rules, so the acquisition wouldn’t nudge it closer to a possible 30% federal limit on overall subscriber concentration under one operator. Unwinding the Insight partnership could actually give Comcast more room under the cap because it would no longer have to attribute the company’s full 1.3 million customers.
“Comcast will very likely add 700,000 subscribers to its subscriber rolls and yet shrink by 650,000 subscribers in the eyes of the FCC,” said Sanford Bernstein & Co. cable analyst Craig Moffett.
AT&T Gets Bigger U-verse in K.C.
02/04/2008Comcast Nears Deal with Insight
03/29/2007Comcast Not Done Dealing
05/10/2005
