Waller Awaits Next Wave of Consolidation3/24/2002 7:00 PM Eastern
Waller Capital Corp. enters its 21st year next week with more than $30 billion in deals under its belt — and the firm belief that the cable industry is on the cusp of another round of consolidation.
Formed April 1, 1982, by former cable finance executive John Waller III, the company was established to serve what its principal believed was a growing need for investment banking expertise in the cable industry.
Waller had worked in the corporate finance department at Time Inc. in the late 1970s, and later served as divisional manager for Home Box Office Inc., in charge of more than 300 cable-operator accounts throughout the Mid-Atlantic states.
It was during his time at HBO — and in his daily dealings with small and large MSOs like Adelphia Communications Corp. and Lenfest Communications Inc. — that Waller became convinced there was a place within cable for more sophisticated financial services.
Although the industry was dominated by two larger cable brokers — Denver-based Daniels & Associates and Communications Equity Associates of Tampa, Fla. — Waller said he saw an opening for a company that had more of an investment-banking focus and a presence close to New York's financial community.
"Being in New York helped a lot," Waller said. "Subsequent to us opening up, our competitors opened offices in New York."
Waller put out his shingle on April Fool's day — a letter he sent to his cable contacts to announce the formation of his company was at first not taken seriously, he joked — and worked from his small studio apartment in Manhattan. The company now has about 24 employees and an office in Rockefeller Center.
Waller's first cable deal was with Tele-Communications Inc., which purchased a small system in Albany, Texas. But the transaction that put the company on the map was the sale of a Chapel Hill, N.C. system to Prime Cable.
"That was one of our first really prominent listing assignments, and we got a lot of attention because of it," Waller said. "It was only 19,000 subscribers, but the fact that it was a visible community and had a lot of growth, and it was an area that everybody wanted to be in — Time Warner wanted it and Prime wanted it — it was the first deal that really got us going."
Since then, Waller has been in on some of the biggest deals in the industry, including Bresnan Communications Co.'s sale of its 690,000 subscribers to Charter Communications Inc. in 2000 and a 700,000-subscriber swap between Time Warner Inc. and MediaOne Group Inc. in 1999. Waller has also branched out into telecommunications and cable programming deals and has established two private-equity funds.
Although Waller Capital has changed with the industry, Waller said that much of its old spirit remains intact.
"Cable is still driven by an entrepreneurial spirit, as opposed to a bureaucratic mentality," Waller said. "There are just a lot fewer companies to deal with, and the companies are more diversified — a lot of them are into programming and things they weren't into before. We've had to diversify to accommodate that."
Waller started branching out into programming in the early 1990s. The firm raised about $100 million for Sci Fi Channel and about $60 million for The Golf Channel.
In 1997 the company started its first private-equity fund — the $100 million Waller-Sutton Media Partners L.P. — which is fully invested, mainly in radio, newspaper and wireless companies.
A second fund, WallerSutton 2000, has been armed with $170 million to make mid-stage investments in media and telecommunications companies.
In between, Waller entered the telecom world, making its first deals in 1999. Last year, Waller made transactions worth about $300 million in telecom projects alone.
Although telecom stocks were hammered last year — and deal-making activity has slowed a bit on the cable side — Waller said that he believes both markets are showing signs of a comeback.
"We're gearing up now for what we see as going to be a lot of action six to12 months from now," Waller said. "Even cable right now is not that much action. But I think both cable and cellular is going to get really busy sometime around year-end or the first part of next year."