Knology Spikes On Deal Chatter

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Stock in Knology Inc., which hit a new 52-week high on Tuesday, after a report in The Wall Street Journal reported the West Point, Ga.-based overbuilder was seeking a buyer, continued its uptick in early trading Wednesday.

Knology shares traded as high 17.62 each on Feb. 29. That followed a jump as much as 22% ($3.53 each) to $19.34 per share in early trading Tuesday, before falling back to close at $17.47 each, up 10.5% or $1.66 per share. The new 52-week apex shattered the old high water mark of $16.23 per share for the stock.

The Journal reported the company had hired advisers to explore a potential sale in the past several weeks, adding that potential buyers would most likely be limited to private equity players.

Sources familiar with the company confirmed The Journal article, adding that Knology hired Credit Suisse and Bank of America Merrill Lynch to seek out potential buyers.

Knology officials did not return a request for comment by press time.

Knology, which has expanded partly via acquisitions (including the 2010 buyout of Sunflower Broadband), has about 795,349 voice, video and data customers in nine states (Alabama, Florida, Georgia, Iowa, Kansas, Minnesota, South Carolina, South Dakota and Tennessee).

The company reported revenue of $519.6 million and net income of $48.3 million ($1.29 per share) for the full year 2011.
According to the paper, Knology could fetch a price as high as $1.5 billion, based on its market cap of $659 million as of Feb. 28 and its $700 million in debt. Based on its cash flow of $187.1 million in 2011, that would represent an eight times multiple, in line with some recent deals.

Insight Communications agreed in August to be purchased by Time Warner Cable for $3 billion in cash, representing about 8.5 times 2011 annualized cash flow.

Also last year, Cablevision Systems agreed to purchase Bresnan Communications for $1.4 billion, representing an 8.3 times multiple of cash flow.

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