Deal Market Cooked This Year

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Continued strength in the debut markets helped fuel another strong year on
the cable deal front, with a handful of deals
reaching the finish line, led by Cablevision
Systems’ $1.4 billion purchase of Bresnan

Cablevision won what was a robust auction
for Bresnan in June, closing the deal on
Dec. 14 and adding 297,000 basic subscribers
in Utah, Montana, Wyoming and Colorado.
It was the first foray outside of the New York
Metropolitan area for Cablevision — which
has about 3 million in customers in New
York, New Jersey and Connecticut — and
probably not the last. Although Cablevision
has said it will not be in the market for every
system that comes on the block, most observers
expect the MSO to look at a few.


Building on the momentum that began to
surface in late 2009, the deal market appeared
to gain steam in 2010 with stronger
multiples and more substantial assets hitting
the auction block. And the deals ranged from
leveraged buyouts — ABRY Partners’ $1.2 billion
deal to purchase overbuilder RCN and
take it private — to small-systems acquisitions
— Knology’s $165 million purchase of
Sunfl ower Broadband in October.

Frustration with public valuations reared
its head in June, when Mediacom Communications
chairman Rocco Commisso offered
to buy the remaining stock in the
MSO he founded for about $6 per share.
While that offer was rejected, Mediacom’s
board accepted a sweetened offer of $8.75
per share. That deal is expected to close early
next year, pending shareholder approval.
Cable investment bankers, which have brokered
many of the deals in the past year,
were encouraged by a combination of stronger
credit markets and higher valuations.

“In 2010, starting early in the year with the
Jet Broadband sale, and continuing into the
year with Bresnan and others, we’ve seen
deals get done at more normal valuations
and in some cases very high valuations,”
said Waller Capital president Garrett Baker.
“These are not sellers that have
to sell.”

According to some analysts,
transactions in 2009 were done
at multiples that ranged from
six to seven times run-rate cash
flow. In 2010, those multiples
rose to between eight and nine
times run-rate cash flow.

RBC Daniels chairman and
CEO Brian Deevy said that the
ability to provide financing
packages with deals has been a
major boost.

“The multiples are moving up because the
financing packages have been much, much
more attractive,” Deevy said. “The banks are
willing to do things in this space. The capital
markets have been very cooperative, the
private-equity marts have been very cooperative,
the private-equity guys are interested.
It should be a really strong year next year.”


Fueling the deal-making engine has been
the debt market, which has enabled several
operators to make creative and attractive
deals. Miller Tabak media analyst David
Joyce said that lower interest rates and a
liquid credit market led to higher deal multiples
in 2010. He added that he expected
more deal activity in 2011, although he
believes that privatization
deals will take a rest after
Mediacom is completed.

Joyce also expects Charter
Communications to further
rationalize its footprint
next year, pointing to its sale
of about 65,000 subscribers
on 32 headends to Cobridge
Communications in October
as “indicative of some work
they might still need to do
with their portfolio.”