San Marcos, Texas-based overbuilder Grande Communications, apparently encouraged by the high price of recent overbuilder deals, is putting itself on the block, according to executives in the cable financial community.
Grande, which has about 145,000 residential and business customers in Texas, has hired New York-based cable investment banker Waller Capital Corp. to explore strategic opportunities, including a possible sale, those executives said.
Grande officials did not return a call for comment.
According to executives in the cable and financial communities, Grande could fetch a price of more than $500 million, based on recent deals.
Fueling Grande’s decision to test the deal waters was the sale of a similar overbuilder – Everest Broadband
– last year. Everest, which operates in suburban Kansas City and has about 37,500 subscribers, agreed to be purchased by Sacramento, Calif.-based SureWest Communications in December. The purchase price for Everest -- $173 million – translates into $4,600 per subscriber, an almost unheard of price for an overbuilder.
Based on that valuation, Grande could be worth more than $600 million, although executives in the cable financial community said the company would likely fetch a price in the $500 million range.
According to Grande’s financial statements – it is privately held but has public debt – the overbuilder had about 98,000 video customers, 114,000 telephone customers and 93,000 high-speed Internet subscribers as of Sept. 30. Revenue for the third quarter was $49.3 million while cash flow was $8.9 million. For the nine months ended Sept. 30, Grande reported revenue of $147.6 million and cash flow of $27.7 million.
Grande has been growing consistently. According to SEC documents, Grande has grown revenue from $96.1 million in 2001 to $189.9 million in 2006 and cash flow has risen from a negative $811,000 in 2001 to positive $31.1 million in 2006.
Grande competes against several incumbent cable operators – each of whom could be a candidate to buy out the company – including Suddenlink Communications (in Midland and Austin), Time Warner Cable (in Austin, San Antonio, Corpus Christi and Waco), CableOne (in Odessa) and Comcast (in Dallas).
According to executives in the cable financial community, other possible bidders include overbuilders Knology and WideOpenWest and St. Louis-based cable operator Broadstripe.
Grande was formed in 1999 by William Morrow, former chairman and CEO of West Point, Ga.-based overbuilder Knology Holdings. Morrow left Grande in 2006 to devote more time to his other telecom investments.
In 2006, Grande hired former Sprint Nextel senior vice president of national field sales and general business Roy Chestnutt as its CEO.