As top-20 MSO owner Susquehanna Media Co. continues to wind through the sales process, an arrangement the company struck in 1993 that now involves Comcast Corp. could make a complex process even more unwieldy.
The complexity also involves Susquehanna’s putting up for sale both its cable assets (233,100 subscribers) and 33 radio stations.
Susquehanna Media put itself on the block in April, hiring UBS Investment Bank as its financial adviser. Parent company Susquehanna Pfaltzgraff is liquidating operations, agreeing on June 7 to sell the Pfaltzgraff Co. dinnerware unit to Lifetime Brands Inc. for $34 million.
Sources say books on the cable systems went out June 3 and initial bids were due by June 30. Several interested parties submitted bids, sources said — including top U.S. MSO Comcast, Armstrong Cable and a group headed by former Susquehanna Media CEO Peter Brubaker.
Brubaker, who retired in February, still maintains an office at MSO unit Susquehanna Communications’ York, Pa., headquarters and has a consulting agreement. He did not return a call for comment last week, but said in earlier interviews he was interested in buying the cable systems and radio stations. It could not be determined whether the other bidders also lobbed in offers for the radio properties.
COMCAST OWNS EQUITY
Comcast’s bid is logical in that it already owns 14.9% of Susquehanna Cable and 17.75% of each of Suscom’s operating subsidiaries. It got those stakes by buying Lenfest Communications Inc. in 2000.
Lenfest got the Suscom equity in a 1993 deal that involved cable systems in Red Lion and Mount Wolf, Pa., valued at $14 million, and investing $11 million in Suscom.
Susquehanna Media said in its most recent 10-K annual report that Susquehanna Cable can’t sell any systems without first offering them to Comcast.
If Comcast refuses, Susquehanna must offer to buy out Comcast’s ownership interests in its systems. (Susquehanna also buys most of its programming through Comcast, and if that relationship were to end programming costs would rise “faster than they would otherwise,” the 10-K said.)
A source familiar with the company said a Comcast bid could be trumped by a higher bid or by an offer acceptable to Susquehanna that also includes the radio stations.
The source said it’s likely Comcast bid solely on the cable properties.
“There are some things that can happen that impact those rights in some ways,” the source said. “If they do something above the holding company, or whatever the ultimate entity is all the way upstairs, that has an impact on Comcast’s rights.”
While good-sized cable assets have sold for $3,000 to $4,000 per subscriber in the past few years — that would value Suscom cable assets at $699 million to $932 million — it’s unclear if Susquehanna’s systems would fetch so high a price.
Some published reports have said the radio stations, though, could sell for up to $1.2 billion, and that large station groups including Emmis Communications Corp. have at least expressed interest.
Brubaker is said to be backed by Boston-based Alta Communications Inc., a private-equity investor that has several radio and cable investments. Brubaker’s son Patrick is also a general partner in Alta. Neither Brubaker returned calls for comment.
Alta has been involved in cable for years — it was an early investor in Continental Cablevision Inc., Fundy Communications and Benchmark Communications — and still holds investments in small operators such as Grande Communications, Rapid Cable and PrairieWave Communications Inc.
Alta’s radio holdings are also substantial, focusing mainly on station groups in small markets. According to its Web site, Alta has interests in about 15 separate radio station groups.
ARMSTRONG’S IN AREA
Armstrong Cable’s bid makes sense because the privately owned MSO owns properties throughout Pennsylvania, including some near York, Susquehanna’s largest system with 90,000 customers.
Armstrong has about 217,000 subscribers in Ohio, Pennsylvania, West Virginia, Kentucky and Maryland. Dru Sedwick, president of Armstrong Group of Cos., Armstrong Cable’s parent, did not return a call for comment.
Susquehanna Communications is the 17th largest U.S. MSO, operating nine systems with about 233,100 subscribers in Pennsylvania, New York, Mississippi, Maine, Illinois and Indiana, according to Securities & Exchange Commission filings. It’s known as a progressive independent, having pioneered interactive-TV games (currently via Buzztime Communications Inc.) and electronic commerce, among other cable innovations.
Susquehanna Media also is the largest privately held radio-station operator in the country, with 33 stations, including six operated by third parties. The company had about 1,675 employees at year-end.
