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WOW! sells off SD systems to Clarity for $262M

Thu, 06/12/2014 - 1:05pm
Brian Santo

WOW! Internet, Cable & Phone is selling systems in two cities in South Dakota to Clarity Telecom. Clarity is paying $262 million in cash for networks serving Rapid City and Sioux Falls.

WOW! picked up the systems with the acquisition of Knology in 2012. The two cities had been served by PrairieWave Communications, which Knology bought in 2007 for $255 million. PrairieWave also had some operations in Iowa and Minnesota. At the time, the company had approximately 57,000 residential customers representing 157,000 RGUs.

As of March 31, 2014, just the South Dakota systems had total of 52,000 customers representing approximately 110,600 RGUs.

WOW! said those two markets generated annual revenues of approximately $81.1 million during the year-ended December 31, 2013. That translates to a purchase multiple of approximately 8.2x on adjusted EBITDA associated with the South Dakota systems, WOW! said.

The sale is expected to close in the late third or early fourth quarter of 2014, following the satisfaction of regulatory requirements and other customary closing conditions.

“The sale of the South Dakota systems enhances our operating efficiencies and enables us to continue focusing more aggressively on our long-term strategic initiatives,” said Steven Cochran, CEO of WOW! “I’m especially pleased that the agreement with Clarity enables our employees and customers to connect with a company that will focus on growing these systems aggressively. Jim Gleason and his team are some of the most respected and knowledgeable cable operators in the industry and our South Dakota employees are a skilled team, dedicated to serving their customers.”

“We’re delighted to acquire the South Dakota networks from WOW! and are equally excited to start a new platform in the broadband communications industry,” said Jim Gleason, CEO of Clarity Telecom. “The South Dakota markets offer tremendous opportunity and we look forward to working with the WOW! employees located in the region. The communities served in South Dakota, southwest Minnesota and northwest Iowa will be the focus of the company and will be the platform to build upon for future acquisitions and growth.”

RBC Capital Markets acted as financial advisor to WOW! on the transaction.

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