Bresnan Bids on Systems

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One year after he sold his systems for $3.1 billion, Bill Bresnan is looking to get back into cable. And he may not be the only industry billionaire on the lookout for system acquisitions, sources said.

Bresnan confirmed his bid for a group of systems that AT&T Broadband sold to Mediacom Communications Corp. last week. He would not reveal which systems, but sources said he had bid for AT&T's Iowa properties.

"I've been out for a year now; I'm getting restless," Bresnan said last week. "We closed on the sale to Charter [Communications Inc.] last February and we have been doing a number of activities.

"I think the market understands cable a little better than it did a few months ago. The time is right."

Bresnan agreed to sell his systems-with roughly 690,000 subscribers in the Midwest-to Charter in July 1999, for $2.1 billion in Charter stock and cash and another $1 billion in assumed debt. Since then, Bresnan has kept busy managing his family investments.

But some billionaire ex-cable guys just can't stay away for long. Former Lenfest Communications Inc. chairman H.F. "Gerry" Lenfest has also been kicking some tires, according to sources. The recently sold AT&T systems are among the properties in which he has expressed interest.

Lenfest, who sold LCI to Comcast Corp. last year for $7.2 billion in stock, did not return phone calls seeking comment.

Their renewed interest coincides with the return of several private-equity firms to the cable business. Although Bresnan said he made his bid for the AT&T systems on his own, he said potential backers are waiting in the wings. He's also received several calls from other private-equity firms over the past few months, he said.

Many callers were investors who had lost money with cable overbuilders, he added.

Bresnan said he was not connected with any private-equity firm, but said he could tap that resource-and others-pretty handily if needed.

Asked if a deal worth $1 billion or more would be out of the question, Bresnan replied, "Definitely not."

As telecommunications stocks tank and the threat of a recession looms, some investors have turned to cable because of its perception as a virtually recession-proof sector. Several private-equity firms that once had cable holdings-including Blackstone Partners and The Carlyle Group-have been aggressively seeking cable deals, sources said.

Blackstone had been a major investor in Bresnan Communications, but Bill Bresnan said he is not currently involved with that company.

Private-equity companies have expressed interest in cable for months, Waller Capital Group chairman John Waller said last week.

"We're hearing now from three groups of buyers: strategic buyers, ex-cable operators and financial buyers," Waller said, declining to name names.

Some investment bankers feel the resurfacing of former cable operators is a sign that the cable-deal market has turned around.

"We could be on the precipice of seeing the entire high-yield cable operator guys coming back again," said one investment banker who asked not to be named. "We went from 15 or 20 top operators to many more than that, and then Charter and AT&T come in and consolidate the industry.

"We could at some point see it explode again. It's kind of like an investment banker's dream: We pull it apart, we put it together, we pull it apart again."

Bresnan said he has set no price or subscriber limit on a deal. His only criteria is the ability to add value to any potential acquisition.

"We have a significant amount of our own equity, plus equity from others," Bresnan said. "We could make a fairly sizeable acquisition. We'd rather not force ourselves into doing a deal because we want a certain amount of customers.

"We'd rather look for the opportunities and let the credibility of the deal be the driving force."

Given a preference, Bresnan added, he would like to acquire systems in the same way he did when he owned Bresnan Communications.

"What we've done in the past is both build new systems, particularly in Chile and Poland, and in the U.S. we took older systems that needed upgrades and added value to them," Bresnan said. "We have a lot of experience in that and that would be our preference-something where we could add value."

Though Bresnan said he has no deals in the works, he said that once a target was found, he'd either take a passive role or an active management role, depending on the situation.

Although most of the staff of Bresnan Communications went to Charter when those systems were sold, Bresnan himself kept about 20 employees to help run his family's investments, mainly passive stakes in public and private-equity funds. That team could also be used to run cable operations.

"We tried to keep a core group of competency," Bresnan said. "We have financial and accounting, analyst and engineering capabilities, Internet capabilities and telephone capabilities. When we look at something, we bring all disciplines to bear."

Will there be enough supply to meet the apparent demand? AT&T sold systems with about 1.4 million subscribers last week to Mediacom and Charter, and may be looking to put more systems on the block.

Earlier this year, Adelphia Communications Corp. said it would seek buyers for non-strategic systems with 500,000 subscribers sometime in 2001.

"I think there [are] going to be more opportunities, more than I thought a few months ago or a year ago, as these companies rationalize their assets," Bresnan said. "Without being specific, my sense is that there will be opportunities."

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