Charter to Buy Cablevision Assets for $1.6 Billion
02/08/2013| 06:46am US/Eastern
Charter Communications Inc. (>> Charter Communications, Inc.) agreed to buy Cablevision Systems Corp.'s (>> Cablevision Systems Corporation) western cable systems, known as "Optimum West," for $1.625 billion in cash.
Cablevision shares rose 5.6% during the regular session Thursday after earlier reports of an imminent deal.
Cablevision bought Optimum West just two years ago for $1.4 billion. At the time, Cablevision's chief operating officer was Tom Rutledge, who left the company in late 2011 to become chief executive of Charter.
In a statement Thursday, Mr. Rutledge said Cablevision had expanded Optimum West's customer base "through the execution of a product and service strategy, which is the same as the one we recently implemented at Charter."
Optimum West, which operates through a Cablevision subsidiary called Bresnan Broadband Holdings LLC, provides television, high-speed Internet and other communication services to roughly 360,000 customers in the Western U.S., including Montana, Colorado, Wyoming and Utah.
A Charter spokeswoman said Bresnan's systems will have synergies with other Charter regions because they cover smaller and mid-sized communities rather than big urban markets.
In contrast, for Long Island-based Cablevision, buying Bresnan roughly two years ago was a strategic and operational shift. Bresnan's cable systems were located across the country from Cablevision's densely concentrated New York metro market. One of Cablevision's big strengths has always been that it is regionally clustered, which has allowed it to be efficient in marketing and in deploying services like digital cable and cloud-based digital video recording faster than other cable operators.
Cablevision said Thursday that it had bought the systems because it had seen the opportunity to increase the value of them by making operational improvements. In 2010, Cablevision had outbid several private-equity firms and rival cable companies, including Charter and Suddenlink Communications, to purchase the Western systems from an investment group led by Providence Equity Partners.
The companies said they expect the deal to close in the third quarter of this year.
Charter said it will fund the acquisition with $1.5 billion of committed bank financing to Charter Communications Operating, LLC, and liquidity from cash on hand and its revolving credit facility.
Charter's Class A shares were up by 38 cents to $81.01 after hours.
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