Time Warner Cable has entered into a definitive merger agreement to purchase Insight Communications for $3 billion in cash.
The transaction, subject to customary closing conditions, will fortify Time Warner Cable's mideastern presence, adding more than 750,000 subscribers in Indiana, Kentucky and Ohio. Insight is owned by The Carlyle Group, Crestview Partners, MidOcean Partners, members of Insight management and others. Carlyle and Insight management took the company private in December 2005, and Crestview and MidOcean purchased a significant stake in the company in April 2010.
The transaction follows months of negotiating for Insight and an auction process that drew bids from WideOpen West and Mediacom Communications, both of which dropped out of the process earlier this month. The other final round auction contender, Cablevision Systems, evidently didn't make a bid.
Time Warner Cable was never part of the auction process. However, given its clout and the contiguity of its systems in the area was always considered to be a likely buyer of Insight.
The deal is the MSO's second acquisition in the region since June, when it reached an agreement with NewWave Communications to buy systems serving 70,000 subscribers in Kentucky and Tennessee. That transaction, Time Warner's first in some five years, is expected to close in the fourth quarter, and will marks its entry into Tennessee.
For its part, Insight, serves some 537,000 high-speed data subscribers, 679,000 video subscribers and 297,000 voice subscribers. It has invested in substantial infrastructure amelioration, including digital conversions and DOCSIS 3.0 deployment.
Officials at Time Warner Cable said that after incurring onetime costs and capital expenditures, the acquisition will yield annual cost efficiencies of approximately $100 million through programming expense savings and other cost reductions. The company expects to realize the bulk of the savings within two years of closing. Given Insight's infrastructure improvements, the No. 2 cable operator expects Insight will have lower capital requirements of 10%-12% of revenues upon completion of the acquisition.
"We believe in our business and its long-term prospects and have long thought that Insight's well-run, technologically advanced systems would fit well with our Midwest operations. With the deal announced today, we are able to acquire those systems at an attractive price that is consistent with both our disciplined approach to M&A and our capital allocation strategy," said Glenn Britt, chairman and CEO of Time Warner Cable, in announcing the deal. "We look forward to serving these customers, welcoming Insight employees to the Time Warner Cable team and building on Insight's successes."
"For more than 25 years, Insight has provided our customers with unparalleled service and an unwavering commitment to excellence," noted Michael Willner, co-founder, vice chairman and CEO of Insight Communications. "We are extremely proud of the investment we've made to transform our cable systems into one of the leading telecommunications platforms in the nation. Given their industry-leading position and depth of resources, we expect that Time Warner Cable will continue building on the advancements our tremendous employees have made while providing outstanding service to our customers. The communities we serve could not be in better hands than with Time Warner Cable which already operates in this region and is widely regarded as one of the most respected technology companies in the world."