Wave Seeks Partner

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Wave Broadband, the Kirkland, Wash.-based mid-sized cable operator, has hired Waller Capital and RBC Daniels as co-advisers to seek out funding to buy out its majority investor and fund future acquisitions, Wave CEO Steve Weed said Thursday.
Weed, who formed Wave Broadband in 2003 with the backing of New York private equity firm Sandler Capital, has grown the company to about 320,000 video, voice and data subscribers largely through acquisition. Wave has systems that mainly border Comcast properties in Portland, Ore; Seattle; San Francisco and Sacramento, Calif. Basically Weed is searching for a private equity fund or other investor that will buy out Sandler Capital's 90% interest (Weed and his executives own the other 10%) and help fund acquisitions.
"We're built for acquiring and integrating cable systems and we want to keep doing that," Weed said in an interview. He added that over the past several months Wave has looked at some potential deals, which led to discussions with Sandler Capital about their plans for the future
"It's pretty clear that what I need to do is to raise money and to go do acquisitions, we're going to need to buy out the existing investors at the same time," Weed said. "We're going to look at our options on how to get that done. That's what we've hired these guys [Waller and Daniels] to do."
Sandler was one of the initial investors in Wave in 2003. Wave raised about $70 million in initial financing in 2003, including about $32.5 million in equity.
Weed said that while the relationship with the New York-based fund has been good, the company is nearing the end of the normal cycle of investment. Sandler has been with wave for about seven years and the typical investment cycle for private equity is about three-to-five years.
"This will be a great deal for them," Weed said.
Weed would not disclose how much Wave intends to raise. However, he said that Wave Broadband has grown cash flow at a 35% annual clip over the past several years, a combination of acquisitions and internal growth. Weed estimated that organic cash flow growth would be about 15% for the company this year.
Wave systems are fully upgraded and offer high-speed data and phone service. However, some markets - like the Portland area - only began offering the triple play last year, so there is ample room for growth.
Another upside to a potential partner is that all of Wave's systems are adjacent to one major cable operator - Comcast - so there is a built in exit strategy for an investor.
Wave is seeking funding at a time when capital markets are opening up and smaller, well-run cable systems are coming on the market.
A handful of small deals have been done over the past several months at healthy multiples - including ShenTel's $148 million purchase of Jet Broadband - and others are expected to hit the market. Bresnan Communications, which went on the block in March,could conclude its auction in the next few months.

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