Grande, ClearSource Will Combine Forces

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Grande Communications Inc. of San Marcos, Texas — one of the few commercial cable competitors still steaming ahead with new builds — has said he will merge with another Texas overbuilder, ClearSource Inc. of Austin.

Deal terms were not disclosed, but Grande CEO Bill Morrow confirmed that ClearSource stockholders will receive shares in his company. Stock would not be issued on a one-for-one basis, Morrow indicated.

The transaction will close after the companies gain federal and shareholder approval.

ClearSource investors include BancBoston Capital, Centennial Ventures, Prime New Ventures and AT&T Ventures, according to the company's Web site.

The all-stock deal allows Grande to keep its cash and use it to expand the business, he added.

Grande presently holds franchises for 30 communities along the I-35 Highway corridor in Texas, from Austin to San Antonio. Its Austin, San Marcos and San Antonio systems are in service, according to the company.

DOZEN FRANCHISES

The merger will add ClearSource's 12 franchises, including operations in Waco, Corpus Christi, Midland and Odessa.

Both Grande and ClearSource have been in a pitched battle for customers with Time Warner Cable. Grande complained to local regulators and the Federal Communications Commission that the incumbent is luring away customers with unpublished discount rates that are not available in areas its competitors do not serve.

The companies already had strong ties. Morrow helped start ClearSource, while Grande's ThriftyCall voice unit provides service for ClearSource's telephony subscribers. Both companies sell bundled video, phone and Internet services to residential and commercial clients.

The two decided to merge now because together, they have 250,000 homes passed, or what company officials term "critical mass."

The merged venture will use the Grande name. Morrow said field-level employees will be retained, but Morrow and ClearSource president and CEO Bear Poth will review the company's structure to determine "how many jobs there are" in post-merger management.

The company has enough capital to find its current franchises, but Grande must go back to the markets to fund its planned Houston buildout. There, the company will partner with electric provider Reliant Energy Inc., which has invested $25 million in Grande and holds a seat on the operator's board.

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