BC Partners and CPPIB purchase Cequel Communications

January 2013 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

Cequel Communications Holdings LLC, which also operates as Suddenlink Communications, confirmed in November that it had been acquired by BC Partners, Canada Pension Plan Investment Board (CPPIB) and members of the Suddenlink management team. The deal, which came in at $6.6bn, had previously been announced in July 2012.

The purchase price is comprised of $1.985bn of new equity from BC Partners, CPPIB and Suddenlink’s existing management team, most notably chairman and chief executive Jerry Kent, $500m of debt, and the assumption of net liabilities of approximately $4.1bn. Prior to July’s announcement, Mr Kent had reportedly been in negotiations to sell Suddenlink for a number of months. “The timely closing of this acquisition marks a new and exciting chapter in our company’s history, with fresh forward-looking capital, new investors and a talented team of over 6000 people, we are in a great position to continue serving our customers with excellence and delivering strong operating results,” said Mr Kent.

Suddenlink, which will continue to be headquartered in St Louis, Missouri, provides television, telephony and high speed internet products to over 1.4 million residential and commercial customers. The company is the seventh largest cable system operator in the US, providing services primarily to Texas, West Virginia, North Carolina, Oklahoma, Arkansas and Louisiana.

The acquisition of Suddenlink comes on the back of another encouraging year for the company. For the financial year ending 31 March 2012 the company generated $1.96bn in revenue and $743m in adjusted EBITDA. Beginning in 2010 Suddenlink had undertaken a $350m investment plan designed to improve its infrastructure and boost the quality and quantity of high definition television channels available to customers. This process continued throughout 2012. For Q3 2012, Suddenlink reported revenues of $511.9m, pro forma revenue growth of 6.1 percent, adjusted EBITDA growth of 7.6 percent, and average revenue per user growth of 9.6 percent.

When the deal was announced in July, Raymond Svider, BC Partners co-chairman and managing partner, said “Suddenlink is one of the most attractive cable companies in the US today, with a world-class infrastructure”.

The completion of the deal continues the recent trend of mergers and acquisitions in the cable television market in North America. Indeed, cable operators WideOpenWest, Cogeco and Time Warner Cable all completed notable acquisitions in 2012. Suddenlink itself purchased NPG Cable in 2011 for $350m.

Cable companies are becoming increasingly attractive propositions for both private investors and television service providers. Steady streams of income from increasing numbers of television and high speed internet subscribers, technological advancements, and new content agreements, all help to provide both a stable and lucrative business model for investors.

The purchase of Suddenlink represents the second purchase made by BC Partners from its ninth fund, which closed in February 2012 having raised $8.2bn. In August, BC Partners completed the purchase of German pharmaceutical company Aenova Holdings for approximately $618m.

André Bourbonnais, senior vice president of private investments at CPPIB said “This represents a unique opportunity to acquire a leading cable operator that has consistently generated industry-leading results. We are delighted to partner with Suddenlink’s management team and BC Partners to position the company for continued growth and long-term success.”

Previous investors Goldman Sachs Capital Partners, Quadrangle Group LLC and Oaktree Capital Management have all been bought out as part of the deal, after investing around $900m between 2004 and 2006.

LionTree Advisors, Goldman Sachs, Paul Hastings LLP and Seyfarth Shaw LLP advised Suddenlink on the deal. Credit Suisse Group, AG, Latham & Watkins and Wachtell, Lipton, Rosen & Katz LLP advised BC Partners and CPPIB.

Richard Summerfield