Comcast Nears Deal with Insight

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Comcast is close to wrapping up a deal to unwind its Insight Midwest partnership with Insight Communications in a deal that could bring one-half of Insight’s 1.3 million cable customers into the Philadelphia-based company’s fold.

Comcast has owned 50% of Insight Midwest -- a partnership that controls all of Insight’s 1.3 million customers -- since 2002 when it acquired AT&T Broadband. Comcast has said as far back as two years ago that it wanted to unwind the partnership -- it gained the right to trigger a dissolution Dec. 31, 2005 -- in an effort to simplify its structure.

Insight, which went private in a $715 million deal last year, has apparently been negotiating with Comcast since January. But according to cable-industry executives familiar with those negotiations, the talks began to heat up recently.

While no deal has been signed yet, cable executives familiar with both companies said a deal could be reached within a few weeks.

Insight CEO Michael Willner could not be reached for comment.

Comcast has had the option of unwinding the partnership either by buying out Insight’s 50% interest for cash or agreeing to take a portion of Insight’s systems in a split. According to some cable-industry executives familiar with the negotiations, the most likely scenario involves Comcast gaining control of systems in northern Indiana and Illinois. Insight and partner The Carlyle Group would take control of subscribers in southern Indiana, Kentucky and Ohio.

However, those same executives said the actual assets exchanged could change as the deal comes closer to completion.

In its 10-K annual report filed March 27, Insight estimated that the cash value of its interest in the partnership is $1.1 billion-$1.8 billion. The document also stated that no serious discussions regarding a split had taken place as of Dec. 31, 2006.

The northern Indiana and Illinois systems make sense for Comcast because they are adjacent to its Chicago and suburban Indianapolis clusters.

According to Insight’s 10-K annual report, the company has about 600,000 customers in northern Indiana and Illinois, including systems in Peoria, Champaign/Urbana, Decatur and Springfield, Ill., and in Lafayette, Richmond, Bloomington and Kokomo, Ind.

Insight’s southern Indiana, Kentucky and Ohio systems have about 681,000 customers and include systems in Louisville and Lexington, Ky.; Columbus, Ohio; and Evansville, Ind.

Executives in the cable financial community said that if a deal is done, it is likely that Carlyle will put the remaining systems on the block. Possible buyers include Time Warner Cable, which has large clusters in Ohio, Indiana and Kentucky.

The Insight partnership appears to be the last remaining joint venture Comcast has to unwind.

In 2006, Comcast exchanged a 21% interest in Time Warner Cable for systems with about 750,000 subscribers, part of the joint purchase of Adelphia Communications with Time Warner Inc.

Shortly after that deal closed July 31, Comcast unwound its Texas Cable Partners and Kansas City Cable Partners ventures with Time Warner, gaining about 800,000 subscribers in Houston in exchange for its interest in roughly the same amount of customers in Kansas City, southwest Texas and New Mexico.

In May, Comcast bought out the 70% of Susquehanna Communications it didn't already own for $540 million, picking up 230,000 cable customers.

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