Kent Kicks Tires on Alliance

1/26/2003 7:00 PM Eastern

Alliance Communications, a small-market operator with about 80,000 subscribers, is fielding offers from several interested parties, including former Charter Communications Inc. CEO Jerry Kent.

Owned by a consortium of banks and private-equity firms, Alliance has systems in West Virginia, Ohio, Pennsylvania, Illinois, Indiana and Southeast Missouri and has been on the block for more than a year. The operator is represented by Daniels & Associates, the Denver-based cable investment banker.

Daniels senior vice president of mergers and acquisitions Randy Wells declined to name potential bidders for the Alliance systems, but said the process is moving forward.

"We're a ways from selecting any buyer," Wells said.

Kent, who for the past year has been running his own telecommunications management firm, Cequel III, with Charter co-founder Howard Wood and long-time attorney David Bergstein, declined to comment on what he called rumor and speculation.

But sources familiar with the situation said Kent was among several interested parties looking at Alliance. They point to three recent Cequel hires as an indication that the company is getting serious about a cable move.

Last week, Cequel significantly beefed up its cable expertise, hiring former Charter senior vice president of Midwest operations William Shreffler as senior vice president of operations. In addition, Cequel hired two other former Charter executives, Andrew Stewart and S. Tyler Nau, as director of corporate development and manager of corporate development, respectively. Both Stewart and Nau had worked in Charter's corporate development and technology group.

Although Kent has said in the past that he was interested in acquiring cable properties, so far the company's main investment has been in the communications-tower sector. Last year, Cequel entered into an investment and management agreement with AAT Communications Corp. to manage the company's 5,000 communications towers.

Kent said that the hirings were not tied to any specific deals.

"It's no secret that we've been looking at cable," Kent said. "We're always looking for good management."

The Alliance systems, managed by R&A management (formerly Rifkin & Associates), have been on the block for more than a year. A deal to sell the systems to Buford Media Group fell through last year, when Buford couldn't obtain the necessary financing.

The Alliance systems need work. As most of the properties are in need of upgrades, some cable executives have estimated they are worth between $500 and $800 per subscriber.

At that price, Cequel would pay between $35 million and $56 million for the properties.

If he turns out to be the winning bidder, it would be Kent's first entry in the cable space since he left Charter in 2001.

Reports on Charter

Charter — saddled with about $18 billion in debt, a shrinking subscriber base and a federal grand jury investigation into some of its accounting practices — also has been the subject of reports that the company is talking with several private equity groups about a sale.

Among the reportedly interested parties: Kent and Goldman Sachs & Co.; Boston-based investor Thomas H. Lee Partners; and the Washington-based Carlyle Group.

Kent has emphatically denied he is in any deal involving his former cable company.

Some analysts have also questioned the veracity of the reports in the Financial Times
and The Daily Deal
which claim the private-equity groups are trying to engineer a deal to buy out Charter's equity for more than $1 billion.

Several industry sources have also expressed doubt, pointing to Charter's heavy debt load — which an equity buyer would have to assume — and Charter chairman Paul Allen's personal $7 billion investment in the MSO.

"It is premature to talk about a post-restructuring equity investment in Charter, given that the restructuring scenario needs to be the focus of any analysis," UBS Warburg cable debt and equity analyst Aryeh Bourkoff said. "Clearly, there will be many interested parties as an investor in the Charter business once the debt restructuring is appropriately structured."

Charter spokesman Dave Andersen declined comment.

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