Bresnan’s Equity Backer Explores Interest in Sale

3/22/2010 6:26 AM Eastern

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

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.