Adelphia Communications Corp. is continuing its acquisition
binge, closing in on two deals that will add more than 300,000 subscribers to the fold.
Adelphia, which agreed to purchase Cablevision Systems
Corp.'s Cleveland operations for $1.5 billion earlier this month, confirmed it has
signed agreements to purchase Prestige Cable TV Inc., a Georgia-based operator with
175,000 subscribers and Galaxy Cablevision Inc., a Sikeston, Mo.-based MSO with 140,000
customers.
The Prestige systems were expected to sell for a premium --
in excess of $5,000 per subscriber, or more than $875 million -- because of their modern
condition. The deal is expected to close in early July.
Prestige, privately owned since 1969 by Jon Oscher, was put
on the block in October. The company, which has subscribers in Georgia, Maryland, North
Carolina and Virginia, is in the process of completing a system-wide upgrade to
750-megahertz capacity.
Although small, Prestige is well clustered. The company has
about 50,000 subscribers in suburban Atlanta; 31,000 subscribers in Carroll County, Md.
(near Washington, D.C.); 38,000 subscribers in North Carolina's Mecklenberg and
Iredell counties (near Charlotte); and more than 40,000 customers in Spotsylvania,
Fauquier and Stafford counties in Virginia.
Adelphia has some significant operations in Virginia and
Maryland, and the Prestige properties should add to existing clusters in those states.
However, the company does not have significant holdings in Georgia or North Carolina --
the Prestige systems in those states are close to properties owned by Time Warner Inc.,
Charter Communications and MediaOne Group Inc. Although that fact could fuel speculation
that the Prestige properties could be used as trade bait, one industry source said it is
unlikely.
"There's always that possibility," the
source said. "But this allows them to get into some pretty lucrative markets. These
systems may be something they would want to hold on to."
For the price, Adelphia will get upgraded systems. The
rebuild -- which includes digital headends to be installed within the next two months and
a growing high-speed-data service -- is expected to be finished before the operations
change hands. Prestige has its own branded cable-modem service, called Prestige.net, with
about 2,000 customers. The company also provides its own local origination programming --
primarily news -- in all its markets through subsidiary Prestige Vision.
"We've taken it upon ourselves to get heavy into
digital," said Prestige director of operations Marty Sonenshine. "With close to
500 employees, it takes more resources [to compete]. We're also privately held.
[Oscher] felt it was time to get out."
The Galaxy systems were expected to garner a much lower
price -- below $2,000 per subscriber -- mainly because they need substantial upgrades.
Galaxy operates in about 500 communities in 13 states, mainly in the Midwest and
Southeast.
Galaxy is owned by the Gleason family, which founded the
company in 1979. When the deal was first rumored last summer, Adelphia was expected to
purchase an 80 percent interest in the company, allowing the Gleasons to retain the
remaining 20 percent and to continue to manage the properties. That arrangement was
reported by Multichannel News in August.
Galaxy president and chief operating officer James Gleason
did not return phone calls seeking comment.
Galaxy is largely owned by three venture-capital companies:
Spectrum Equity Associates, T.A. Associates and Fleet Equity. Those entities have held
positions in the company since 1994 and were widely believed to be looking to cash out.
Galaxy's systems are in need of upgrades. Most are
between 330 megahertz and 450 megahertz capacity, and its headends serve an average of
between 700 and 800 customers each. The company is in the middle of a $20 million rebuild,
which it hopes to complete in about three years.
Thomas MacCrory of Communications Equity Associates is
representing the sellers in both deals.
