Time Warner Cable is looking to expand its business services portfolio and network assets in the southeast by shelling out $600 million in cash for DukeNet Communications, a firm that delivers a range of commercial-class services and operates an optical fiber network that stretches 8,700 miles.
TWC struck the deal, which includes the repayment debt, with Duke Energy Corporation and investment funds managed by Alinda Capital Partners, which each own 50% of DukeNet. They expect to close the deal in the first quarter of 2014. DukeNet has about 120 employees.
The bulk of DukeNet’s network covers North Carolina and South Carolina, but a portion also reaches into five other states, including hubs in Richmond, Va.; Atlanta, Ga.; Nashville, Tenn.; Jacksonville, Fla.; and Birmingham, Ala. About 80% of DukeNet’s fiber miles are in TWC’s footprint.
DukeNet uses that network to deliver a portfolio of services to businesses, large, enterprise and government customers, including cell site backhaul, Carrier Ethernet, private line, dark fiber, colocation and general professional services.
The purchase represents the first big M&A move out of TWC’s business services unit since former Cox Communications exec Phil Meeks took the helm on June 3 as the division’s executive vice president and chief operating officer. Meeks recently reorganized the unit, setting a goal of reaching $5 billion in annual revenues in four to five years, more than doubling the division’s current annual output.
“Business Services is a key growth area for Time Warner Cable and this acquisition will greatly enhance our already growing fiber network to better serve customers, particularly those in key markets in the Carolinas,” Meeks said, in a statement. “This acquisition will help us expand our fiber footprint at a price that is consistent with our disciplined approach to M&A, accounting for expected synergies and tax benefits.”
"This is a positive transaction for Duke Energy,” added Marc Manly, president of Duke Energy’s Commercial Business group. “The sale completes Duke Energy’s transition out of DukeNet, which although a growing operation, is a non-core business to our company.”
RBC Capital Markets, LLC advised Duke Energy and Alinda on the sale of DukeNet, and Moore & Van Allen PLLC provided legal counsel. Edwards Wildman Palmer LLP provided legal counsel to Time Warner Cable.
Acquiring regional fiber-based communications companies is a budding trend among MSOs as they look to stoke business services growth.
In September, Cox Communications cut a deal to acquire EasyTEL, a Tulsa, Okla.-homes competitive local exchange carrier. Comcast, meanwhile, bought Chicago-area CLEC Cimco Communications in 2010.