In a sale that could help set prices for small rural MSOs,
Buford Television is on the selling block, company officials said last week.
An investment banker who specializes in cable deals
estimated that privately held Buford could fetch anywhere from $1,500 to $2,000 a
subscriber, which would put its sale price at $262.5 million to $350 million.
"It's a great time for something like this to
come to market," said one banker. "It tests the market for small rural cable
properties ... the classic cable market."
Tyler, Texas-based Buford, a 175,000-subscriber MSO, has
retained Donaldson Lufkin & Jenrette Securities Corp. to handle the sale, according to
Buford president Ben Hooks.
Buford owns cable systems mainly in Texas, Missouri,
Arkansas and Louisiana that average 600 subscribers a system, Hooks said. He added that
about 60 percent of Buford's subscribers are located in areas surrounding the cities
of Dallas, Little Rock, Ark., Springfield-Branson, Mo., and Alexandria, La.
"It's a lot of headends, over 250," said the
banker. "Everybody would be interested in bits and pieces of it."
However, the banker noted that Buford's partners want
to sell the company as a whole rather than break it up which would be unwieldy. Potential
buyers, some of which are already surfacing, include anyone from venture capital groups to
small MSOs such as Classic Cable of Austin, Texas, and Galaxy Cablevision of Sikeston,
Mo., according to the banker.
TCA Cable TV Inc., like Buford, is also based in Tyler but
is not necessarily considered a potential buyer, as it has had an aversion in the past to
increasing its debt load, among other reasons, sources said.
Buford is now owned by a partnership that includes the
Buford brothers, Robert and Geoffrey, who are chairman and vice chairman, respectively;
Hooks; chief financial officer Mark Seale; chief operating officer Ron Martin; and chief
administrative officer Kay Monigold. Hooks, Seale, Martin and Monigold make up the
management team that has actually been running the MSO.
Both the Buford brothers want to cash out of the company,
which prompted the partners to retain DLJ to advise them financially and put the MSO on
the market, Hooks said.
Several years ago, Robert Buford wrote a book in which he
said he eventually wanted to get out of the cable business and contribute his assets
towards good works he was interested in, including a foundation he started, Hooks said.
"We've always known Bob would be exiting the
business," he added.
Recently, the financial market has set some very well
publicized values on medium-sized and large MSOs with major clusters of systems in
metropolitan areas. But there haven't been any such bellwether deals yet for smaller
MSOs with non-clustered systems.
Microsoft Corp. co-founder and billionaire Paul Allen, who
is still on the prowl for cable properties, is shelling out a whopping $4.5 billion for
Charter Communications Inc., adding to his $2.8 billion acquisition of Marcus Cable Co.
Those deals translate to about $3,700 a subscriber for Charter, or 14 times 1999 cash
flow; and $2,500 a subscriber for Marcus, or 11 times cash flow. In turn, AT&T Corp.
is forking over 13 times 1999 cash flow for Tele-Communications Inc., or roughly $2,700 a
subscriber.
The banker, who sees Buford being sold in the $2,000 to
$1,500 range, added that only the market will tell.
Hooks said, "It's too early to speculate."
He declined to discuss Buford's cash flow, and DLJ
officials couldn't be reached for comment. Buford's management team is willing
to weigh a variety of options, including continuing to run the MSO under any new
ownership, like Charter president Jerry Kent will do under Allen. One source suggested the
Buford management team might try to buy the MSO itself.
"Price is going to be the issue," Hooks said.
"We can be part of the it [the company once it is sold] or not. We're very open.
Certainly, cable is very favored now in the eyes of investors. People like Paul Allen have
cemented that."
Referring to the Buford management team, Hooks added,
"A lot of us are very involved in the industry, and we certainly enjoy cable
television."
Buford, under the direction of Martin, was one of the first
non-TCI systems to pioneer digital video by commercially deploying Headend in the Sky at
its 1,000-subscriber system in Heath, Texas. Buford's next two digital launches are
slated for Cabot, Ark., and Eastland, Texas, according to Martin.
DLJ recently completed the so-called "book" on
Buford, and has been distributing it.
