Charter Wins Bresnan Bidding at $1.6B

Deal a Homecoming of Sorts for CEO Rutledge

Charter Communications agreed to purchase the former Bresnan Communications systems in Colorado, Montana, Utah and Wyoming from Cablevision Systems for $1.625 billion last week, in a deal that should serve as a sort of homecoming for Charter CEO Tom Rutledge.

Rutledge, who left Cablevision about a year ago to become Charter’s CEO, is intimately familiar with the properties, which Cablevision purchased in 2010 for about $1.4 billion. It was widely believed that Cablevision purchased those systems — which it rebranded as Optimum West — in an effort to spread Rutledge’s operational magic outside of its core New York City-area footprint. While the jury is still out on the ultimate success of that endeavor, the longtime cable executive will get a chance to finish the job.

“While one could argue Rutledge and company already have a lot on their plate, we believe no one knows this asset (and the upside) better than Rutledge,” Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak wrote in a note to clients.

Optimum West has about 304,000 customers in Big Sky country, about the same it had when Cablevision first purchased the systems. But the systems pass more than 600,000 homes. Rutledge, in a statement, said they are some of the fastest-growing cable properties in the U.S.

“These former Bresnan properties operate in growing communities, and the network, employees and customer base have been well-served for many years,” Rutledge said in a statement. “In particular, over the past two years Cablevision, as Optimum West, has grown video, Internet and telephone customers through the execution of a product and service strategy which is the same as the one we recently implemented at Charter.”

Cablevision has pumped money into the systems — about $180 million according to some analysts’ estimates — and only put the properties up for sale late last year after receiving inquiries from outside parties.

Charter was widely expected to emerge as the winner of the Optimum West auction, which included bids from Time Warner Cable, Suddenlink Communications and private-equity fund TPG Capital.

“We are proud of the value we created in the Optimum West properties,” Cablevision CEO James Dolan said in a statement. “We made strategic investments in the cable system and significantly enhanced the network to provide our customers with more robust products and services.”

The purchase price is in line with past deals that have been valued at about 8.5 times forward-looking cash flow. The price is about 8.9 times Optimum West’s annualized third-quarter adjusted cash flow and 8 times Charter’s estimate of the unit’s first year adjusted cash flow under its new owners, according to Cablevision.

Credit Suisse and Goldman Sachs acted as financial advisers to Charter. Citi and J.P. Morgan acted as co-lead financial advisers to Cablevision. BofA Merrill Lynch and Guggenheim Securities also provided financial advice to Cablevision.