Charter Communications has reached an agreement with Cablevision Systems Corporation to buy cableco Optimum West.
Charter will pay US$1.625bn in cash for the asset, funded with US$1.5bn of committed bank financing to Charter Communications Operating,…
Charter Communications has reached an agreement with Cablevision Systems Corporation to buy cableco Optimum West.
Charter will pay US$1.625bn in cash for the asset, funded with US$1.5bn of committed bank financing to Charter Communications Operating, and liquidity from cash on hand and its revolving credit facility. Credit Suisse and Goldman Sachs acted as financial advisors to Charter, and are also providing debt financing.
The price represents a multiple of 8.9x Optimum West’s third quarter 2012 annualised adjusted EBITDA, the companies said, and a purchase price multiple of less than 8.0x Charter’s estimate of Optimum West’s first year adjusted EBITDA under Charter.
“Given the double digit growth profile of Optimum West, we view the implied purchase price multiple as attractive,” said Charter’s CFO Christopher Winfrey.
“In addition, the acquisition will increase our conversion rate of adjusted EBITDA to free cash flow.
Charter expects to reach 5.0x leverage but said it will continue to target 4.0x to 4.5x over time.
Connecticut-based Charter, the fourth-largest cable operator in the United States, expects the deal to close in Q3.
Optimum West connects more than 660,000 households in Colorado, Montana, Wyoming and Utah.
Commenting on the deal, Cablevision CEO James Dolan said: “We are proud of the value we created in the Optimum West properties. We made strategic investments in the cable system and significantly enhanced the network to provide our customers with more robust products and services.”
Dolan revealed Cablevision had started exploring unsolicited approaches for its subsidiary back in November. He said the company was not looking to divest Optimum West but, based on the approaches that it received, it decided to explore a potential transaction.
Reports at the time highlighted Time Warner Cable and Suddenlink Communications as potential suitors, as well as Charter.
Cablevision’s core market is New York, as well as Connecticut, New Jersey and Pennsylvania; Optimum West was its only asset outside of this region.
Citi and JP Morgan acted as co-lead financial advisors to Cablevision. BofA Merrill Lynch and Guggenheim also provided financial advice to Cablevision. Sullivan & Cromwell acted as legal counsel to Cablevision.
