Time Warner Cable chief financial officer Irene Esteves said the cable giant sat out the initial rounds of the Insight Communications auction mainly because of the asking price, but re-entered the fray for the Midwest cable operator as it became clearer that a favorable deal could be reached.
Insight put itself on the block in March at an estimated asking price between $3.5 billion and $4 billion. At the time, Time Warner Cable believed that at that price -- an estimated 11 to 12 times cash flow multiple -- it wasn't worth the company's time to participate in the auction process. That process included several large cable operators at the beginning - including Charter Communications, Suddenlink Communications and Cablevision Systems - but as the process wore on, that field was whittled down to overbuilder WideOpenWest and Mediacom Communications. The auction ended in mid-July with no clear winning bidder, opening up Insight to conduct separate talks with prospective suitors outside of the process.
Esteves said that Time Warner Cable started talks with Insight around July 15 when it became clear that it could get a discussion going that would "allow us to purchase a very attractive asset at a very attractive price."
Combined with about $300 million in tax benefits and about $100 million in annual operating synergies, the deal is valued at about 6 times cash flow, in line with Time Warner Cable's own trading multiple of about 5.9 times cash flow. That, she said, fits in with TWC's disciplined approach to deals.