Ex-MSO Chief McHugh Prowls for Deals11/18/2001 7:00 PM Eastern
Former Vista Communications Inc. president Neil McHugh is the latest former cable operator looking to get back into the business.
Though he has no deals to report so far, he has been negotiating with several operators, including bankrupt Galaxy Telecom Inc.
McHugh, who sold Vista's last system — a 30,000-subscriber Smyrna, Ga., operation — to Charter Communications Inc. for about $125 million three years ago, has formed Atlanta-based Vista III Media to go after systems in secondary markets across the country.
Private-equity firm Boston Ventures, which had backed Vista, is supporting McHugh's new venture as well.
McHugh said he decided to get out of the cable business in 1998, at the height of the consolidation frenzy, mainly because systems were attracting prices too high to pass up.
But with many large cable operators now looking to shed operations in some nonstrategic markets, prices have become more reasonable. And several private-equity firms have been looking to invest in cable operations.
"[In 1998] we didn't feel it was the right environment," McHugh said. "Over the last couple of years, we thought, a lot of things have changed. There's more opportunity for someone like myself."
Private-equity firms, burned by the debacle in the telecommunications market, are looking at cable with renewed interest, according to cable-centric investment bank Waller Capital Inc.'s president, John Waller.
"There are a lot of opportunities," Waller said. "Cable looks good, especially with digital and high-speed data making things clearer. I think the funds are looking for something less risky. Cable still has a place where you can park big dollars. A lot of those funds are sitting on several billion dollars of equity."
Boston Ventures had been a major cable-sector investor, with large investments in major MSOs like Continental Cablevision Inc. and Falcon Holdings Group, as well as in such smaller cable operators as First Carolina Cable TV, Northern Prince George's County Cable and Peachtree Cable Associates. But the private-equity firm cashed out in the late 1990s.
The company recently began buying up print-media properties, and in August it purchased Cahners Travel Group, a unit of Cahners Business Information, parent of Multichannel News.
McHugh said he went to the National Show in Chicago last May looking for deals. It was there that he renewed his relationship with Boston Ventures.
Boston Ventures had backed Vista in 1998, hoping to grow the company to between 200,000 and 300,000 subscribers. While they both decided it was better to sell out, getting to that level this time would not be out of the question.
Other operators, such as Rifkin & Associates and Mallard Cablevision, have set out to buy secondary properties at bargain prices and had little success. But McHugh said he could afford to pay a little more today because of such innovations as fiber-optic technology, which makes it easier to connect headends in fairly disparate locations.
Vista III will concentrate mainly on systems with 5,000 to 10,000 subscribers or more. While he will look at properties almost anywhere in the country, most of McHugh's experience lies in the Southeast.
One system that may fit the bill is Galaxy's 25,000-subscriber operation in Mississippi. While McHugh said that he has had discussions with Galaxy, he declined to give further details.
"We've talked with them [Galaxy]," McHugh said. "We've sold a lot of systems to Galaxy, including some in Mississippi. We know the residents there. We know the communities."