Canadian Pension Plan Investment Board (CPPIB), BC Partners, and Suddenlink President and CEO Jerry Kent – along with members of his management team – have bought the nation’s seventh-largest cable operator for $6.6 billion.
The deal, which is slated to close in the fourth quarter after it clears the usual regulatory hurdles, does three things: It allows Kent to stay on as the leader of Suddenlink; provides a cash infusion for more infrastructure upgrades and possible acquisitions, which Kent mentions in this online interview; and pays a nice profit to previous Suddenlink investors Goldman Sachs Capital Partners, Quadrangle Group and Oaktree Capital Management.
"This agreement will allow us to continue to invest in our infrastructure, new technology and, most importantly, our people," Kent said. "We have 6,000 employees who are dedicated to providing a superior level of customer care and who generate consistent, industry-leading operating results. The injection of fresh, forward-looking capital is a testament to their hard work and capabilities. We thank our lenders and original investors who believed in us and helped us build such an amazing company. We believe our new partners are a perfect match for our management team to help us keep doing what we do best – taking better care of our customers than our competitors – and we look forward to continuing our long, successful track record of delivering superior returns."
Kent said in an online interview that Suddenlink would continue to keep its headquarters in St. Louis. Suddenlink COO Tom McMillin and CFO Mary Meduski are among the members of Suddenlink's management team that were included in the deal.
The cash and debt deal is worth roughly $2.5 billion. Suddenlink, which operates under Cequel Communications Holdings, has an enterprise value of $6.6 billion. The deal includes a $1.99 billion equity portion from BC Partners, CPPIB and Kent and his management team, along with incremental debt of $500 million and assumption of existing net liabilities of $4.094 billion as of March 31.
According to Forbes, the private equity funds that invested $900 million in Suddenlink have cashed out for around $3.4 billion.
In connection with the acquisition, a newly formed subsidiary of the company has entered into a commitment letter with Credit Suisse for $500 million of senior unsecured bridge loans. The company expects to use the proceeds from such bridge loans or an equivalent amount of high-yield debt securities to fund a portion of the purchase price. In addition, the company will continue to be managed by Cequel III pursuant to the management agreement.
Suddenlink offers triple-play services to more than 1.4 million residential and commercial customers, primarily in Texas, West Virginia, North Carolina, Oklahoma, Arkansas and Louisiana. The company's network passes 3.0 million homes, is interconnected by a national backbone and was recently upgraded to state-of-the-art technology through its $350 million "Project Imagine,” which also included the addition of faster DOCSIS 3.0-based data tiers and more HD choices.
The Suddenlink agreement is the latest in a string of cable mergers and acquisitions. Yesterday, Canadian cable operator Cogeco announced it had purchased Atlantic Broadband for $1.36 billion.
On Tuesday, WideOpenWest (WOW) announced that its $1.5 billion deal to privatize Knology was completed. In February, Time Warner Cable closed its $3 billion purchase of Insight Communications.
Two years ago, Cablevision Systems emerged as the winning bidder for Bresnan Communications by paying $1.365 billion. Suddenlink reportedly kicked the tires on acquiring Bresnan but ended up buying NPG Cable for approximately $350 million.
Kent a dealmaker in the cable industry ranks
Kent, who is a principal owner in the St. Louis Blues NHL hockey team, played a pivotal role in building Suddenlink into the seventh-largest cable operator in the U.S., and he also serves as CEO of Cequel III, which he co-founded in January 2002. After helping to found the company in 2003, Kent was able to build up Suddenlink’s footprint by acquiring systems from Cox and Charter, among other deals.
Kent began his cable career in 1983, heading up acquisitions and finance for Cencom Cable Associates, and later he served as the company’s chief financial officer. Following the sale of Cencom, Kent co-founded Charter Communications.
Under Kent’s leadership, Charter became one of the 10 largest cable operators in the U.S., serving 1.3 million customers. In 1998, Microsoft co-founder Paul Allen acquired Charter.
Kent serves on the boards of directors and executive committees of CableLabs and the NCTA. He currently serves as chairman of The Cable Center board of directors. He also serves on the board for C-SPAN and the advisory board for Cable in the Classroom. Last year, Kent co-chaired The Cable Show 2011 in Chicago.
At the recent Cable Show in May, Kent was honored with the NCTA’s Vanguard Award for Distinguished Leadership during an awards ceremony.