Insight Auction Fizzles: Sources8/08/2011 12:01 AM Eastern
After months of negotiating and a handful of bidders that have
come and gone, the auction for Insight
Communications continues to be in flux,
with the last two strategic bidders dropping
out of the running and chances that
the mid-market MSO will find a buyer at
its hoped-for price becoming increasingly
Insight went on the block in March, after
the company hired UBS AG and Bank
of America Merrill Lynch to serve as advisers.
The New York-based cable operator,
with about 693,000 customers in
Indiana, Ohio, Kentucky and Illinois, initially
hoped to fetch between $3.5 billion and $4 billion.
According to sources familiar with the matter, Mediacom
Communications and WideOpenWest, which had made it
through to the last round of bidding, have dropped out.
The remaining last-round bidder, Cablevision Systems, apparently
did not make a final offer.
According to several people familiar with the matter, the
formal auction process has ended with no buyer selected.
OWNERS FACE QUANDARY
That leaves Insight’s owners — The Carlyle Group, MidOcean
Partners and Crestview Partners — in a bit of a quandary. Do
they shut down the auction and continue
to run the MSO as before, or do
they try to attract a new player at a potentially
“Anything that happens now is outside
of the [auction] process entirely,”
said one member of the cable-investment
community who asked not to be
Another executive in the cable-investment
community said one possible option is for Carlyle
to sell its interest to MidOcean and Crestview (which includes
cable pioneer Jeffrey Marcus), similar to a deal it cut in 2010
with the private-equity players. Carlyle sold half of its 84% interest
in Insight to MidOcean and Crestview in 2010 for an undisclosed
Carlyle had attempted to sell Insight in
2008 for about $3 billion, but pulled that
auction when the credit markets collapsed.
According to sources in the cable financial community familiar with the
auction, Insight now is attempting to
have individual conversations with potential
suitors, including Time Warner
Cable, which sat out the auction process.
Those same sources said that any
transaction now would likely be for much
less than $3.5 billion.
Time Warner Cable declined comment.
Officials at Insight were unavailable
The apparent failure of the auction process
is a big change from earlier in the year when optimism
was high that a deal would be done.
The auction attracted heavy interest from the start. Earlyround
bidders included several private-equity players and
strategic bidders, cable operators including Charter Communications
and Suddenlink Communications.
PROJECTIONS LOOKED HIGH
The auction began to break down because bidders couldn’t
make the numbers work, people familiar with the process said.
At $3.5 billion to $4 billion, Insight was valuing itself at 11
times forward-looking cash flow. Although the company has
been on a growth run over the past
five years — with revenue rising at a
13.6% average annual clip and cash
flow up an average of 10.8% per year
between 2005 and 2009 — results
stumbled a bit in 2010, with revenue
up 7% and cash flow up 11% for the
More telling was a basic video-subscriber
loss (of 24,700) in 2010, the first
such annual subtraction since 2004.
Insight added 1,600 basic customers in the first quarter of
2011, but revenue and cash-flow growth slowed substantially
to just 2%.
“People just didn’t believe their growth projections,” said
one cable executive familiar with the auction process.