Bresnan’s Equity Backer Explores Interest in Sale

By Mike Farrell , Todd Spangler , Kent Gibbons -- Multichannel News, 3/1/2010 6:56:00 AM

The Wire hears from several sources in the cable banking community that Providence Equity Group has quietly been taking meetings with bankers over the past several weeks to gauge interest in selling its majority stake in cable operator Bresnan Communications.

Providence backed cable legend Bill Bresnan in his purchase of about 320,000 customers in Montana, Wyoming, Colorado and Utah from Comcast in 2002, marking a return to cable ownership for the entrepreneur who had sold his last company to Paul Allen’s Charter Communications.

Quadrangle Group and Comcast, which has a 30% stake in Bresnan Communications, also backed Bresnan’s return.

The move to investigate options does not appear to be connected with Bresnan’s death last November. Instead, it’s about private equity generally staying with an investment for five to seven years before seeking an exit. Providence has had the Bresnan investment for almost eight years.

“I think this is more to see what they can do as opposed to what they will do,” one executive in the cable banking community familiar with the meetings said.

The talks are described as in their very early stages and could go nowhere, sources told The Wire. Providence Equity and Bresnan Communications representatives declined comment.

Bresnan’s systems could attract $900 million to $1.1 billion, well above the $675 million the properties were purchased for, according to some analysts. Cable stocks are generally trading at multiples of between 6 and 7 times per-share cash flow, and privately- held Bresnan is estimated to generate cash fl ow in the $145 million to $160 million range. That’s based on annual revenue of about $400 million and industry cash flow margins of 36% to 42%.

Potential buyers include other private equity groups and small-market-centric cable operators, such as Mediacom and Charter.

Comcast, of course, could make a bid, but would it want to buy systems back at a higher price than it sold them for eight years ago?

Comcast also could sell its Bresnan stake to a new buyer, but it’s a good partner for an equity player, providing purchasing discounts on programming.