They’ve entered into a definitive merger deal where Time Warner Cable will acquire Insight for $3 billion in cash. Insight serves more than 750,000 customers in Indiana, Kentucky and Ohio that include some 537,000 high-speed data subscribers, 679,000 video subscribers and 297,000 voice subscribers.
Time Warner Cable believes that, after incurring onetime costs and capital expenditures, it will save some $100 million through programming expense savings and other cost reductions—mostly within two years of closing.
Insight is currently owned by The Carlyle Group, Crestview Partners, MidOcean Partners, members of Insight management and others. Carlyle and Insight management took the company private 12/05, and Crestview and MidOcean purchased a significant stake in the company 4/10.
“We believe in our business and its long-term prospects and have long thought that Insight’s well-run, technologically advanced systems would fit well with our Midwest operations. With the deal announced today, we are able to acquire those systems at an attractive price that is consistent with both our disciplined approach to M&A and our capital allocation strategy,” said Glenn Britt, Chairman and CEO of Time Warner Cable. “We look forward to serving these customers, welcoming Insight employees to the Time Warner Cable team and building on Insight’s successes.”
Commented Marci Ryvicker, Wells Fargo Senior Analyst: “We estimate that TWC can purchase most of Insight with cash on hand but would likely tap the debt markets as well. TWC should still be able to fund share repurchases but likely at a less aggressive rate (perhaps half of what they have done the past few quarters)
in order to stick with their 3.25x leverage target.
The market may view this purchase negatively as TWC has been a ”capital return” story and the multiple on Insight has reportedly been high. However, TWC has recently been ”punished” for its ”lack of investment.” Insight is one way for TWC to improve operations and show growth, which has lagged its peers. Post the New Wave acquisition (6/13), geographically this deal makes sense and is actually a lower multiple than feared. NET NET thinking through this, we do think this could be a longer term positive for TWC.”