July 19, 2012 / 3:25 AM / 5 years ago

UPDATE 3-BC Partners, CPPIB to buy U.S. cable operator Suddenlink

* Suddenlink is 7th largest cable operator in United States

* Equity infusion plus incremental debt total about $2.5 bln

* Cash, debt deal pegs Suddenlink enterprise value at $6.6 bln

By Euan Rocha

TORONTO, July 19 (Reuters) - Private equity firm BC Partners and one of Canada’s top pension funds are joining forces with the management of Suddenlink Communications to buy out the U.S. cable operator in a cash and debt deal worth roughly $2.5 billion.

BC Partners and the Canadian Pension Plan Investment Board said late on Wednesday they are teaming up with U.S. cable industry veteran Jerry Kent to buy Suddenlink from Goldman Sachs Capital Partners, Quadrangle and Oaktree Capital Management.

The Suddenlink deal is the latest in a string of deals in the cable sector both within and outside the United States.

The industry has seen some of the largest buyouts of the last two years, as both sector incumbents and private equity firms have swooped in to acquire cable companies that offer the promise of revenue growth and steady cash flows.

In August last year, Time Warner Cable bought cable operator, Insight Communications from Carlyle Group for $3 billion to grow its reach in the U.S. Midwest.

Earlier on Wednesday, Cogeco Cable Inc, a Canadian company that serves mostly rural customers in the provinces of Ontario and Quebec, said it would pay $1.36 billion to buy U.S. cable operator Atlantic Broadband, in a move aimed at gaining a foothold in the larger U.S. market.

The Suddenlink deal includes a $1.99 billion equity portion, along with incremental debt of $500 million. Including existing debt, the deal pegs Suddenlink’s enterprise value at $6.6 billion.

Suddenlink offers cable, Internet and telephone services to more than 1.4 million residential and commercial customers in Texas, West Virginia, North Carolina, Oklahoma, Arkansas and Louisiana. It is the seventh-largest U.S. cable operator with annual revenues of around $2 billion and 6,000 employees.

FURTHER GROWTH

Kent, who will continue in his role as Suddenlink’s chief executive, said the deal will allow his team to invest further in new technology and infrastructure.

The executive, who has worked in the industry for close to three decades, co-founded cable operator Charter Communications Inc and built it into one of the top 10 U.S. cable companies.

“Cable is an industry we know well in both Europe and the United States” added BC Partners managing partner Raymond Svider, adding that the cable sector “epitomizes the defensive growth characteristics” that the firm typically seeks in an investment.

The deal comes almost exactly a year after the private equity firm agreed to acquire Swedish cable company Com Hem for $2.6 billion. BC Partners was also involved in the creation of German cable operator Unitymedia, which it later sold to U.S.-listed cable giant Liberty Global for $3 billion in 2009.

Earlier in July, Reuters reported Suddenlink’s part owners - Quadrangle and Goldman Sachs Capital Partners - are preparing to sell Norwegian cable operator Get, either later this year or early next year.

SUDDENLINK DEAL

Suddenlink, which has recently undergone an infrastructure upgrade, said it is well positioned to benefit from continued strength in television viewership and industry trends like the growth in high-speed Internet adoption.

The company has consistently reported solid revenue growth over the last five years, boasting compounded annual revenue growth of 7.4 percent since 2007.

“This represents a unique opportunity to acquire a leading cable operator that has consistently generated industry-leading results,” said André Bourbonnais, who heads private investments for CPPIB.

Toronto-based CPPIB manages funds for the Canadian Pension Plan. It invests in a wide range of assets and instruments. As of March 31, the fund was worth C$161.6 billion ($159.9 billion) of which C$26.3 billion was invested in private equities.

CPPIB, along with its Canadian peers like Teachers’ and Caisse de depot et placement, have been among the world’s most active dealmakers in recent years, making major bets both in Canada and overseas.

The companies said the Suddenlink deal is expected to close in the fourth quarter of 2012, subject to regulatory approvals.

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