Insight Communications has reached an agreement to sell a significant portion of its equity to two private equity funds, one headed up by cable industry pioneer Jeffrey Marcus, for an undisclosed sum.
The deal, terms of which were not disclosed, would give Crestview Partners and MidOcean Partners a 42% equity interest in Insight.
According to an April 1 statement announcing the deal, the two private equity groups will purchase their shares from certain existing shareholders and The Carlyle Group.
Carlyle Group, which invested about $2 billion -- including $1.3 billion in debt -- in Insight in 2005 to take the company private, will retain a 42% equity interest in Insight.
Insight CEO Michael Willner and chairman Sydney Knafel will also continue to hold a series of shares that will enable them to elect a majority of Insight's board of directors. The deal will not have an impact on Insight's day-to-day operations and its current management team will remain in place.
Insight is the ninth-largest cable operator in the country with 716,400 customers in Kentucky, Indiana and Ohio. The company reported a 13% gain in 2009 revenue to $981 million and adjusted operating income before depreciation and amortization of $311 million for the year, which represented a 10% gain.
Given trading multiples of cable stocks of 5.5 times to 7.3 times cash flow and an estimated debt load of about $1.3 billion, the private equity firms could have spent between $200 million and $400 million for their stake.
The deal marks the end of what has been a nearly three-year odyssey for Carlyle to cash in its investment in the cable operator.
Carlyle had tried to sell the MSO in the past and was reportedly seeking as much as $3 billion for its interest in Insight in 2007, but pulled the company off the market when bids fell short of expectations.
Marcus, who heads up the media and communications division for Crestview, is a long-time cable executive. He sold his 1.3 -million subscriber Marcus Cable operations to Paul Allen in 1998 for about $2.8 billion. Marcus joined Crestview in 2005 and later that same year helped them land their first cable acquisition, a 140,000-subscriber system in Puerto Rico from Adelphia Communications.
"Insight is a company I have long admired and I have the highest regard for their talented management team," Marcus said in a statement. "We are proud to become their partners and hope to contribute to their continued success."