Rural cable operator Mediacom Communications scored a major deal, agreeing to pay $2.2 billion for a slug of cable-television systems from AT&T Broadband.
The systems were pretty much stepchildren in the AT&T portfolio, serving small cities and towns in Georgia, Illinois, Iowa and Missouri. But Mediacom Chairman Rocco Commisso has built his company over the past five years by stiching together systems in many truly rural areas.
But the new buys give him cities including Columbus, Georgia; Moline, Illinois; and Des Moines, Iowa. Those are sub-prime markets to AT&T, which is focused on markets like San Francisco and Chicago. "To me these are crown jewels, to them it's a rural divesture strategy," said Commisso, once CFO of Cablevision Industries. The deal comes to $2,600 per subscriber and around 12 times running-rate cash flow.
The deal will double Mediacomm's size to 1.6 million subscribers. The good news is that AT&T gets to trim its debt a bit. The bad news is that Mediacomm is paying cash, relying heavily on bond and bank markets to cover the price. Commisso wouldn't specify how he plans to finance the deal, but it could boost his leverage from around six times to around eight times cash flow.
- John Higgins