Rebuilding Mode Under Way at Harron9/26/2004 8:00 PM Eastern
After selling the bulk of his systems to Adelphia Communications Corp. in 1999, Paul Harron, CEO of Harron Entertainment, is looking to rebuild his cable empire.
Harron Entertainment struck a deal earlier this month to purchase a majority interest in Gans Communications Inc. from private-equity firm Nautic Partners. Gans has about 42,000 subscribers in systems in Pennsylvania, Maryland and Virginia. While terms of that deal were not disclosed, some sources in the cable investment community said that the deal was worth about $120 million.
Harron already owns about 70,000 subscribers in 33 communities in Maine and New Hampshire, operating under the MetroCast Cablevision name.
Denver-based cable investment banker Daniels & Associates is advising Gans on the sale.
One Harron executive said that the Nautic deal is just the tip of the iceberg.
“We’re looking to get back up to around 300,000 subscribers, back to where we were,” said Harron Entertainment executive vice president Jim Bruder.
Bruder said Harron Entertainment will mainly look for systems on the East Coast, and is interested in getting involved in the ongoing Adelphia auction.
“We just got the NDA [nondisclosure agreement] today [Sept. 17], and we’re looking to get on their list. With everybody else, we’re trying to get a look,” Bruder said.
Adelphia last week announced that it would offer its systems in seven separate clusters, ranging in size from 500,000 subscribers to 1.3 million subscribers.
Bruder said Harron’s backers include banks and Harron Equity, the private family fund set up after the Adelphia sale in 1999. In addition to those relationships, Bruder said that Harron Entertainment might also look to raise additional equity investments as it expands.
Bruder added said that reaching its expansion goals will take about two years.
Nautic Partners became involved in Gans last year, when it was part of an $88 million financing package to help the company pay off some debt and upgrade its systems. As part of that deal, Nautic contributed $38 million for the equity portion, with the remaining $50 million coming from banks.
Bruder said that upgrade — to between 750 Megahertz and 860 MHz capacity is largely completed. And though he didn’t want to disclose any advanced-services subscriber numbers for the Gans systems, he said there is potential upside in offering high-speed data and digital cable service to a larger number of customers.
MetroCast has enjoyed its own success in offering high-speed Internet and digital service, with penetration rates for each service topping 30%.
Harron Communications was a pioneer in the cable industry — Paul Harron’s father, also named Paul, built his first system in Utica, N.Y. in 1964. Paul Jr. took over the reins in 1976 and expanded the MSO significantly.
After selling about 300,000 subscribers in Pennsylvania, New York, Michigan, New Hampshire and Massachusetts to Adelphia in 1999 for about $1.17 billion in cash, Harron held on to about 30,000 subscribers in Maine that were part of MetroCast Cablevision.
MetroCast was spun off from Harron Communications in 1998 because Harron owned a television station in Portland, Maine, and was prohibited at the time from owning cable systems in that area.
Since then, the regulations have changed, but Harron Entertainment sold the television station in January to Hearst-Argyle Television for $37.5 million.
Harron purchased New England Cable, with about 25,500 subscribers, in 2000 for an undisclosed sum.
Paul Harron has also teamed up with another former cable executive — former Avalon Cable president Joel Cohen. Cohen left Avalon shortly after it sold its systems to Charter Communications Inc. in 1999 for $845 million.
Cohen had worked with Harron before joining Avalon.
|Harron Entertainment’s recent acquisitions|
|Company||Subscribers||Geographic Area||Date Completed|
|SOURCE: company and published reports|
|New England Cable||25,500||New Hampshire, Maine||2000|
|Gans Communications||42,000||Pennsylvania, Maryland, Virginia||pending|