Cable Technology Feature Article
Cablevision's Optimum West Purchased by Charter for $1.625 Billion
By Carolyn J Dawson, TMCnet Contributor
Charter Communications (News - Alert), Inc. has signed a strategic contract with Cablevision Systems Corporation. As per the contract, Bresnan Broadband Holdings, LLC, also known as Optimum (News - Alert) West, will be purchased by Charter for $1.625 billion. Cable operating systems in Colorado, Montana, Wyoming and Utah are administered by Optimum West, serving 304,000 video subscribers and 366,000 consumer associations in at least 660,000 houses.
In a statement, Tom Rutledge, president and CEO at Charter, explained that "With this transaction, Charter will acquire some of the fastest growing cable assets in the United States. These former Bresnan properties operate in growing communities, and the network, employees and customer base have been well served for many years.”
He continued, “In particular, over the past two years Cablevision, as Optimum West, has grown video, Internet and telephone customers through the execution of a product and service strategy, which is the same as the one we recently implemented at Charter. Optimum West is an ideal fit for Charter and we anticipate an efficient integration process."
The purchase cost of $1.625 billion corresponds to 8.9 times the buying cost of Optimum West's yearly Adjusted EBITDA for the third quarter of 2012, and to a maximum of eight times the buying cost of Optimum West's initial year Adjusted EBITDA under Charter management, as per Charter's projections. Charter will be provided a complete step-up in the tax basis of the purchased resources by the structured transaction. The actual buying cost is maximum seven times the projected initial year’s Adjusted EBITDA if Charter's approximation of the current value of the tax resource is considered.
According to Christopher Winfrey, CFO, Charter, the organization feels that setting the buying costs in multiples is a smart decision, as Optimum West’s development profile is well into double digit growth.
James L. Dolan, president and CEO, Cablevision concluded, "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. I am confident that our Optimum West team will continue to build on that success under new stewardship."