In one of the more profitable sales of an overbuilder, newcomer private-equity group Avista Capital Partners has agreed to buy WideOpenWest LLC in a deal estimated at about $800 million.
WideOpenWest has about 357,000 subscribers in the suburbs of Detroit (where it competes with Comcast Corp.); Columbus, Ohio (where it competes with Insight Communications Co. and Time Warner Cable); South Chicago, Ill. (Comcast again); and Cleveland (where it competes with Adelphia Communications Corp.).
The deal also marks a huge windfall for WOW’s backers — Boston private-equity firm Abry Partners and New York private-equity firm Oak Hill Capital Partners. According to executives in the mergers and acquisitions community, Abry and Oak Hill have invested a total of about $200 million in WOW since 1999. The sale, expected to be completed in May, represents a fourfold return on their investment.
The deal also represents a healthy valuation for WOW — about 9 times annual cash flow of about $90 million. Some publicly traded incumbent MSO’s trade for between 6.5 times and 8 times cash flow.
The company will keep the WideOpenWest name as well as its current employees and management team, led by CEO and long-time cable executive Colleen Abdullah. WOW has a total of about 930 employees.
Northwestern Mutual, based in Milwaukee, and Standard Life Investments (USA), headquartered in Edinburgh, Scotland, have committed to be minority co-investors in the acquisition.
This is the first media investment for Avista, which was formed earlier this year by seven former partners and nine former professionals from DLJ Merchant Banking Partners, the private equity affiliate of Credit Suisse Group. Avista seeks to make controlling or influential minority investments primarily in growth-oriented media, healthcare and energy companies.
Credit Suisse First Boston and New York telecom investment banker Waller Capital Corp. served as advisers to WOW in the deal.