Buford Media president Ben Hooks has dropped out of the running for about 70,000 subscribers owned by R&A Management, formerly Rifkin Associates, in West Virginia and several Midwestern states.
Buford had signed a letter of intent for the properties in July. The systems are located in West Virginia, Ohio, Pennsylvania, Illinois, Indiana and Southeast Missouri.
Back in 1999, R&A — which does business as Alliance Communications — had about 100,000 subscribers. Since then, it's lost customers to direct-broadcast satellite competitors.
"We were working on Alliance, but that took a different twist," Hooks said. "Probably one of the biggest issues I've got is that I want to start out with a larger scale of customers. I'm not interested in doing a 5,000- or 10,000-subscriber deal, so my pickings are not as good as they used to be."
Hooks isn't out of the deal market yet, he stressed.
"We're staying in the business and we're going to remain patient," he said. "I have no intention of leaving the industry. When the time is right, the time will be right. I just have to be patient."
Slow deal market
Hooks has company. Several other former cable executives who attempted to regain a foothold in the market are finding a dearth of deals.
In the past year, at least three other former cable executives have tried to get back into the industry, including Bresnan Communications president Bill Bresnan, former Simmons Communications Corp. founder Steve Simmons and former Vista Communications Inc. CEO Neil McHugh.
While Bresnan landed a deal to buy 320,000 subscribers from AT&T Broadband (now Comcast Corp.) earlier this year, that deal has run into a few snags.
According to sources, Bresnan ran into difficulty trying to line up financing for the deal after the high-yield debt market went south. Comcast is expected to provide some type of seller financing to allow Bresnan to complete the deal.
Simmons — who earlier this year formed Patriot Media & Communications with private-equity firm Spectrum Equity Investors to purchase 80,000 subscribers from RCN Corp., for $245 million — has yet to close on that deal.
McHugh, who sold his last Vista Communications system to Charter Communications Inc. in 1998, has been trying for months to acquire smaller rural systems. He formed Vista III Media with private equity firm Boston Ventures in October 2001, and so far has about 27,000 subscribers in Northeast Mississippi. His most recent deal was in May for about 1,500 customers in Holly Springs, Miss.
Sold in '99
The Alliance deal would have been a major one for Hooks, who has been looking to rebuild his cable company after selling Buford Cable to Classic Communications Inc. in 1999 for about $300 million. He's been in search of cable properties for several months, and currently has about 7,000 subscribers in Arkansas.
Hooks would not say why the R&A deal soured, but sources said price was a central reason.
According to sources, Hooks offered between $800 and $1,500 per subscriber for the operations, or between $56 million and $105 million. But apparently R&A wanted more.
Adding to the problem is the fact that Hooks may have found it difficult to raise money for the purchase because of the condition of the properties.
According to several sources within the cable community, the Alliance systems are in dire need of work.
Those same sources said that because the systems are so small — some have as few as 500 subscribers per headend — it will be difficult to provide advanced services in an economical manner.
Although the systems are primarily in rural areas, they held the potential to make money — provided Hooks could find an economical way to provide digital-video and high-speed-data services.
Hooks had been a big proponent of WSNet Inc.'s satellite digital offering, but since that company filed for Chapter 11 bankruptcy protection in October, its ability to provide additional service is now under a cloud.
In the past, Rifkin had been a big player in the secondary markets, but it sold 460,000 subscribers in most of its better properties to Charter Communications Inc. in 1999 for $1.5 billion. Though Rifkin held on to some very small rural systems after the Charter deal with the intention of growing its rural base, the company scrapped those plans about three years ago.