By William Launder and Anupreeta Das
NEW YORK (DOW JONES)--Regional cable company WideOpenWest and its private equity owners are considering a bid for fellow operator Knology Inc. (KNOL) in a potential deal aimed at boosting revenue synergies from its TV, Internet and phone subscription services, according to people familiar with the situation.
Terms of any such deal weren't revealed, but The Wall Street Journal previously reported that Knology--which operates mainly in the South--could fetch up to $1.5 billion at auction, based on a multiple of around eight times earnings before interest, taxes, depreciation and amortization and a transaction premium.
A successful deal would hinge on WideOpenWest and its majority owner, private equity fund Avista Capital Partners, securing an attractive price and financing for Knology, said the people, who noted that the deal could still fall through.
Other private equity funds also have looked at Knology, which hired financial advisers to oversee a potential sale earlier this year, but WideOpenWest is the most likely potential buyer, the people said.
Spokeswomen for WideOpenWest and Avista declined to comment. A representative for Knology wasn't immediately available.
WideOpenWest, also known as WOW, is based in Englewood, Colo., and serves around 1.4 million subscribers in Illinois, Michigan, Ohio and Indiana, according to its website. Knology, based in West Point, Ga., offers similar services to just under 800,000 customers in Alabama, Florida, Kansas and Tennessee, as of the end of 2011.
For 2011, Knology had $518.6 million in revenue and adjusted annual EBITDA of about $187 million. It also has around $700 million in net debt. WideOpenWest's financial details aren't disclosed by Avista.
Private equity firms have long been active buyers and sellers of cable operators. The regular cash flows generated by cable companies' subscription businesses can be used to pay down the debt used by buyout funds to finance the transactions.
Meanwhile, many cable operators are attempting to gain scale as they face rising programming costs and new competition from the likes of Verizon Communications Inc.'s (VZ) FiOS and Internet-based TV services. Last year, Time Warner Cable Inc. (>> Time Warner Cable Inc) acquired Carlyle Group-controlled Insight Communications for around $3 billion, beating out rival bidders including WideOpenWest. Cablevision Systems Corp. (>> Cablevision Systems Corporation) struck a deal in 2010 to buy Bresnan Communications for $1.4 billion.
Also on the block currently is Wave Broadband LLC, which operates in Washington, Oregon and California, and which could fetch up to $1 billion at auction, according to previous reports.
-By William Launder and Anupreeta Das, Dow Jones Newswires; 212-416-3412; [email protected]