Almost two years after trying to get a firm deal, cable veteran Bill Bresnan finally landed an agreement to buy a chunk of rural-state cable systems that had been part of AT&T Broadband—and at a lower price than expected.
Bresnan Broadband crafted a new deal in which Comcast—which bought AT&T Broadband in December—stays on as a partner. It calls for Comcast to get about $575 million: $525 million in cash plus about a third of Bresnan Broadband's equity, which UBS Warburg analyst Aryeh Bourkoff says is worth about $150 million. Bresnan will get small-town systems serving 317,000 subscribers in Colorado, Wyoming and Montana.
The deal is much different from one Bresnan cut with AT&T a year ago. That was a straight-cash purchase, for $735 million. He planned to spend another $300 million to rebuild the neglected properties but couldn't get the deal financed. By keeping Comcast in as a partner, he doesn't have to raise as much money and also gets to buy programming at Comcast's ultra-low rates.
Bourkoff pegs the deal at $2,100 per subscriber, about 10 times cash flow.
Bresnan—the one-time Tele-Prompter CEO who sold his cable operation, Bresnan Communications, to Charter Communications three years ago—said that upgrading the systems is his first priority.
"Half of the customers are in systems of just 450 MHz or less," Bresnan said. "We're going to rebuild and add two-way."
The company will be based in White Plains, N.Y., and Bresnan said he's building a headquarters staff of only 45 people, mostly in finance and human resources. Some systems will be consolidated, but he isn't planning a dramatic overhaul of system management.
"They've got good people," he said. "In a way, it's amazing, with the lack of capital support, that their spirits are up."