Bresnan Communications has closed a deal to acquire 30
cable systems with about 416,000 subscribers previously owned by TCI Communications Inc.
Bresnan, Blackstone Capital Partners III Merchant Banking
Fund L.P. and TCIC have formed a new partnership -- Bresnan Communications Co. L.P. --
which will own cable systems in Michigan, Minnesota, Nebraska and Wisconsin.
Coupled with Bresnan's existing systems, which have
about 228,000 subscribers, the new company will serve some 644,000 customers.
The deal was originally announced in June.
Although the value of the deal was not disclosed, given the
industry benchmark of about $2,000 per subscriber for such transactions, it could be worth
roughly $832 million.
Blackstone, through an undisclosed cash contribution, will
own about 40 percent of the new partnership, with TCIC owning 50 percent. Bresnan will own
10 percent, and it will manage the systems.
TCIC, a unit of Tele-Communications Inc., had previously
owned an 80 percent interest in Bresnan.
As a result of the new partnership's assumption of
debt from TCIC and TCIC's deconsolidation of its prior Bresnan partnership, TCIC will
reduce its consolidated debt by about $920 million.
The greatest advantages for TCI, company spokeswoman Katina
Vlahadamis said, are the ability to restructure a large portion of its debt and the
opportunity to partner with Bresnan and Blackstone and create a bigger presence in the
Suzanne Thompson, a spokeswoman for Bresnan, said the deal
was part of her company's clustering strategy.
"These [new] systems are close to the systems that we
already had," Thompson said. "They will overlay nicely with those systems."
For example, the deal allows Bresnan to create a large
cluster stretching from southern Minnesota to the Wisconsin border, connecting existing
systems in Mankato and Owatonna, Minn., and TCI systems in Rochester and Winona, Minn.,
and LaCrosse, Wis.
By connecting those cities via fiber optic lines, Bresnan
will also be able to provide advanced services, like high-speed Internet access.
Thompson said about one-half of the TCI systems involved in
the deal have been upgraded to 550-megahertz hybrid fiber-coaxial technology or better.
"We will put a large majority [of those systems] on a
fast track to upgrade," she added.
As of Sept. 30, more than 80 percent of Bresnan's
current subscribers were on HFC systems, and 72 percent had access to 750-MHz technology,
She added that Bresnan plans to have more than 80 percent
of the total company's systems -- including the new TCI locations -- upgraded by
The TCI deal will also allow Bresnan to eliminate some of
its headends, going from 133 to 79. Thompson said about 71 percent of Bresnan systems will
be served by six central headend facilities, while 80 percent will be interconnected via
some kind of cluster.
"The whole objective is to bring a broad range of
advanced services to those markets," Thompson said. "To enhance the level of
clustering, interconnection and the level of upgrades."
In related news, Bresnan has completed its acquisition of a
group of Michigan systems from Cable Vision Inc.
Bresnan is picking up about 26,000 customers in the
mid-Michigan communities of Mt. Pleasant, Ludington, Alma, St. Johns and Clare, located
near Bresnan's cluster in Bay City.
"With our emphasis on markets in the upper Midwest,
the acquisition of these cable franchises will further strengthen our geographic,
operational and organizational concentration in mid-Michigan," said Michael Bresnan,
senior vice president, domestic division for Bresnan, in a prepared statement.
Waller Capital Corp. represented the seller.