Cable Operators

Charter Buys Optimum West for $1.625B

Deal Expected to Close in Q3 2/07/2013 11:34 AM Eastern

Ending minutes of speculation, Charter Communications confirmed it has acquired Cablevision Systems’ Optimum West properties for $1.625 billion.

Optimum West, the former Bresnan Communications, has about 304,000 customers in Colorado, Wyoming, Utah and Montana.

 “With this transaction, Charter will acquire some of the fastest growing cable assets in the United States,” said Charter CEO Tom Rutledge in a statement . “These former Bresnan properties operate in growing communities, and the network, employees and customer base have been well served for many years. In particular, over the past two years Cablevision, as Optimum West, has grown video, Internet and telephone customers through the execution of a product and service strategy, which is the same as the one we recently implemented at Charter. Optimum West is an ideal fit for Charter and we anticipate an efficient integration process.”

Cablevision bought the former Bresnan properties in 2010 for about $1.4 billion. The company put the systems on the block late last year after receiving several  inquiries from outside parties.

 “We are proud of the value we created in the Optimum West properties. We made strategic investments in the cable system and significantly enhanced the network to provide our customers with more robust products and services,” Cablevision CEO James Dolan said in a statement. “I am confident that our Optimum West team will continue to build on that success under new stewardship.”

The $1.625 billion acquisition price represents a purchase price multiple of 8.9 times Optimum West’s third quarter 2012 annualized Adjusted EBITDA1 and a purchase price multiple of less than 8.0 times Charter’s estimate of Optimum West’s first year Adjusted EBITDA under Charter. The transaction will be structured to deliver to Charter a full step-up in the tax basis of the acquired assets. Taking into account Charter’s estimate of the present value of this tax asset, the effective purchase price multiple is less than 7.0x the estimated first year Adjusted EBITDA.

“Given the double digit growth profile of Optimum West, we view the implied purchase price multiple as attractive,” Charter chief financial officer Christopher Winfrey said in a statement.

The transaction is subject to customary closing conditions, including regulatory approval and is expeted to close in the third quarter of 2013.

Credit Suisse and Goldman Sachs acted as financial advisors to Charter, and have also provided debt financing commitments for the transaction.

Citi and J.P. Morgan acted as co-lead financial advisors to Cablevision. BofA Merrill Lynch and Guggenheim Securities also provided financial advice to Cablevision. Sullivan & Cromwell LLP acted as legal counsel to Cablevision.

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