Overbuilder Knology confirmed last
week (Aug. 4) it has a definitive agreement to buy Sunflower Broadband for $165 million in cash, continuing
an aggressive expansion effort.
The price values Sunflower at about 7.5 times 2010 estimated
cash flow, in line with recent private cable sales,
such as Cablevision Systems’ pending acquisition of
Bresnan Communications. Sunflower will contribute
about $51 million in revenue and $22 million in cash flow
to Knology after the deal closes in the fourth quarter.
Multichannel News reported July 27 the two companies
were close to a deal.
Knology has about 600,000 residential voice, video
and data subscribers in Florida, South Dakota, Georgia,
South Carolina, Alabama and Tennessee. Sunflower will
add about 51,000 homes passed and around 105,000 revenue
generating units in Lawrence, Eudora and Douglas
counties in Kansas.
Miller Tabak media analyst David Joyce estimated that
Sunflower has about 40,000 video customers, 30,000 voice
customers and 35,000 high-speed Internet subscribers.
He said the deal appeared to be accretive to Knology’s
cash flow.
Knology’s chief financial officer, Todd Holt, said the acquisition
would not put pressure on the company’s balance
sheet.
Sunflower was formed in 1970 and is controlled by
The World Co., the Lawrence, Kan.-based publisher of
the Lawrence-Journal World newspaper. The cable operation
has long been considered to be well-run and
on the leading edge of technology. Sunflower was one
of the first cable operators to launch digital cable service
and was among the pioneers in rolling out DOCSIS-
based modems.
Knology’s expansion has been both internal and external.
It launched an “edge-out” program last year, extending
cable and broadband service to the fringes of
existing franchise areas.
Recent acquisitions include Sioux Falls, S.D.-based
PrairieWave Holdings, with about 57,000 customers,
for $255 million and Dothan, Ala.-based Graceba Total
Communications for about $75 million, both in 2007.
Knology was also said to be among the early bidders
for Bresnan, which is being sold to Cablevision for $1.4
billion.
SunTrust Robinson Humphrey advised Knology and
RBC Daniels advised Sunflower Broadband. Credit Suisse
and SunTrust Robinson Humphrey have fully committed
to provide the required debt capital for the deal,
Knology said.
