Overbuilding Operator on Block

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Millennium Digital Media, the St. Louis-based MSO with about 118,000 subscribers in Maryland, Oregon, Michigan and Washington, is on the block, with some sources in the financial community estimating that the MSO is asking as much as $460 million for its systems.

Books on the Millennium properties went out June 1, according to several sources in the financial community.

Millennium, which was started by four former Charter Communications Inc. executives in 1995, has been rumored to be for sale for years, but apparently the MSO’s backers — led by Stamford, Conn.-based private-equity firm TSG Capital Group LLC — decided to go ahead with the process this time.


Earlier this year, sources in the financial community said that Millennium and TSG were sending out feelers to possible buyers and were talking to several cable investment bankers — including Denver-based Daniels & Associates — to handle a deal. At the time, Millennium senior vice president of marketing Peter Smith denied the company was for sale and said it had not hired any bankers.

But last week, when asked if the company was for sale, Smith declined comment. He also said Millennium CEO Kelvin Westbrook was traveling last week and would not be available for comment.

Millennium was formed in 1997 by four seasoned cable executives, former Charter chief financial officer Jeffrey Sanders; Westbrook, a former investment banker and Charter executive; former telecom consultant Charles Payer; and former Charter and Brooks Fiber Properties executive John Brooks. Sanders and Payer resigned in 2001 after Millennium shifted its focus from acquisitions to growing existing operations.

Brooks, Millennium’s chief operating officer, and Westbrook remain.

Millennium was an avid participant in the consolidation frenzy of the late 1990s, backed by TSG Capital.

TSG Capital, with about $740 million in capital under management, is also an investor in broadcaster Entravision Communications Corp., apparel maker Urban Brands Inc. and Telscape Communications Inc., a local-exchange carrier that caters to the U.S. Hispanic market.

TSG Capital partner Darryl Thompson did not return a phone call seeking comment.

According to one source in the financial community that has received an offering book from Millennium, the MSO has 47,000 subscribers in Maryland, 37,000 customers in Washington and 34,000 subscribers in Michigan. Revenue for the systems was $101 million last year and cash flow came in at $42 million. Average monthly revenue per subscriber was about $71, the source said.

That same source said that Daniels & Associates has the listing for the properties.

Officials at Daniels also did not return phone calls seeking comment.

A good portion of Millennium’s revenue is dropping to the cash-flow line: according to the source, Millennium had annual cash flow per subscriber of $352, which works out to $29.33 per month.


That could grow even larger as the MSO rolls out phone service. Earlier this year, Millennium cut a deal with Net2Phone Inc. to provide phone service and was expected to begin rolling out the product in the first quarter.

Millennium has some pluses and minuses. It has an incumbent cable system in Lansing, Mich., with about 34,000 customers, and two large properties in Anne Arundel County, Md., and in Seattle that are overbuilds of Comcast Corp.

“Who is going to want 80,000 subscribers in an overbuild?” asked the source in the investment community.

That has led some to speculate the systems will likely be sold to several different buyers rather than just one.

Private-equity investors are logical candidates — firms like Providence Equity Group, Carlyle Group and Spectrum Equity Associates have backed several cable deals this year and are said to be on the hunt for more properties.


Other possible suitors include WaveDivision Holdings LLC and overbuilder WideOpenWest.

Wave is headed by Steve Weed, who ran the Seattle property for Millennium for years before striking out on his own in 2002.

Weed’s been an aggressive buyer — he purchased Charter’s systems with 25,500 customers in Port Orchard, Wash., in 2003 for $91 million and recently acquired Knology Inc.’s 8,000-subscriber Cerritos, Calif., properties for about $10 million. Weed is backed by Sandler Capital Management.

WideOpenWest, with about 286,500 subscribers in the Midwest, including Michigan, also could be a candidate.