Brera Capital Partners L.P., a private-equity firm based in
New York, has invested $100 million for a controlling interest in Austin, Texas-based
Classic Communications Inc. to help finance its pending $300 million acquisition of Buford
Television.
Classic, which emerged as the winning bidder for Buford in
late April, said the Brera money would also be used to upgrade its cable systems.
The Buford deal, which would bring 170,000 subscribers into
the Classic fold, is expected to close this summer.
Brera will receive 64.4 percent of Classic's privately held
common stock, based on an aggregate implied transaction value of $700 million, which
includes Classic's $300 million purchase of Buford and the assumption of existing debt and
debt to finance Buford.
Brera will also designate the majority of Classic's board
of directors.
Brera principal Lisa Hook said Classic will become a
vehicle to acquire other rural cable companies.
The geographic expansion of large players in urban markets
has driven down the cost of providing advanced services in smaller areas, Hook said,
which, in turn, has made rural properties like Classic's more attractive.
"We like the rural cable story," she said.
"Given the general belief that rural is an attractive play, we thought that a
360,000-subscriber set of systems was an attractive entry."
Classic -- which has about 190,000 subscribers in
nonmetropolitan markets in eight states in the Southwest, Midwest and Western regions of
the country -- has been one of several small operators expected to file for initial public
offerings.
Although this deal would seem to preclude an IPO, Hook said
the company would still consider testing the public markets.
"[Classic] has been approached by investment banks to
consider an IPO," she said. "It is one of the things the company has to look at.
We will pursue the best strategy for the company and its financial needs."
Classic chairman Merritt Belisle and president Steven Seach
will remain with the company and retain their board seats, and they are expected to work
closely with Brera to grow its cable footprint.
"This investment will allow us to nearly double our
subscriber base," Belisle said in a prepared statement. "With this transaction,
we are very well-positioned to benefit from further consolidation opportunities in the
nonmetropolitan cable markets."
Goldman, Sachs & Co. acted as financial adviser to
Classic, while Merrill Lynch & Co. represented Brera.
