The auction for Optimum West is nearing the finish line, with four players in the running for the former Bresnan Communications systems, and could be decided in the next several weeks.
According to several sources in the cable financial community, final bids in the auction are expected by the end of this month, which would trigger the next phase of the process — selecting a winner. But hammering out an actual deal could take the process well into next month, those sources said.
Cablevision Systems purchased the former Bresnan systems in 2010 for about $1.4 billion, renaming the operation Optimum West in May of 2011. With about 300,000 customers in Montana, Utah, Colorado and Wyoming, Cablevision put the properties up for sale later in 2012 after it received several inquiries from outside parties.
The first round of the auction was completed in late December and, according to sources inside the cable fi nancial community, four bidders are still in the hunt, including strategic players Time Warner Cable, Charter Communications and Suddenlink Communications and an unidentified private-equity group.
Representatives of Charter, Time Warner Cable, Suddenlink and Cablevision declined comment.
Cablevision was lauded for its financial acumen back in 2010 when it announced the Bresnan purchase. Although the ultimate price was a robust $1.4 billion — working out to about 8.5 times trailing cash flow — Cablevision had structured the deal so that it contributed only about $400 million in equity, with the rest of the purchase price being debt. Since that time, Cablevision has invested about $183 million in Optimum West, according to ISI Group analysts Vijay Jayant and David Joyce.
Sources familiar with the auction said the former Bresnan systems could sell for as much as $1.6 billion. That price would assume an 8.8 times multiple of forward looking cash flow, higher than the estimated 8.5 times multiple Cablevision paid in 2010.
All of the potential suitors have sufficient firepower for a deal. Time Warner Cable bought Insight Communications for $3 billion last year and Charter, which is headed by former Cablevision chief operating officer Tom Rutledge, has operations near the former Bresnan systems. Rutledge also told cable channel CNBC in December that he believed the Optimum West properties would be a good fit.
Suddenlink, headed by cable veteran Jerry Kent, went through a recapitalization last year that pumped about $2 billion in equity into the secondary-market MSO. With 1.4 million customers in seven states, St. Louisbased Suddenlink also has experience in running and integrating secondary market systems.
Optimum West at a Glance
As of Sept. 30, 2012
Locations: Colorado, Montana, Utah and Wyoming
Video Customers: 304,000
High-Speed Data Customers: 285,000
Voice Customers: 169,000
Average Monthly Revenue Per Video Customer: $141.19
Source: Cablevision Systems