Cable company WideOpenWest [NYSE:WOW] is exploring a sale of multiple clusters of its assets in the Midwest and the Southeast, four sources familiar with the matter said.
The Englewood, Colorado-based company, which is the sixth-largest operator of cable television and broadband internet networks across the country, has been broadly weighing various options off and on for years, two of these sources and four further sources familiar with the matter said. It has been working with financial advisor Bank of America since mid-2020, three of the sources said.
WOW is not proactively exploring a sale in its entirety, but would follow its fiduciary duty to consider an offer if a suitor came in with a suitably priced proposal, one of the sources said.
The company worked with financial advisor Credit Suisse in 2019 in order to weigh unsolicited inbound interest, this source said.
WOW is running processes for one cluster in the Southeast and two clusters in the Midwest, with each cluster marketed as a package generating around USD 100m in EBITDA, this source said. The assets could fetch a multiple of as high as 10x to 12x EBITDA, another of the sources said.
If a sale gets done at a higher multiple than WOW’s current public trading multiple, it might lead to a re-rating of the company’s valuation in the public markets, the second source said. Shares of WOW opened trading today at USD 12.79, for a market cap of over USD 1.1bn. The company trades at an EV/LTM EBITDA multiple of 7.92x.
The environment for cable deals may be favorable at the present moment, following the recent sale of cable operator Astound Broadband to Stonepeak Infrastructure Partners for USD 8.1bn in November, one of the sources said.
Speaking at a Deutsche Bank conference in early March, WOW CFO John Rego pointed to the Astound transaction and its 12.5x EBITDA multiple, among others, when talking about the deal environment in the cable sector. WOW has “a long history of buying and selling markets,” he said, adding that the M&A market seems “pretty good.”
A sector advisor and some of the sources pointed to sponsors, including Stonepeak, as likely suitors for WOW’s assets, with one of the sources also saying that Altice USA [NYSE:ATUS] would be a logical buyer. Altice has repeatedly expressed enthusiasm for M&A, making an unsuccessful run at family-controlled Canadian company Cogeco [TSX:CGO] with a bid of over CAD 11bn last year. Altice announced the acquisition of Morris Broadband in March, in a deal implying an equity value of USD 310m for the target.
The current exploration of options is the latest in a long string of M&A moves for WOW. This news service reported in 2015 that the company had been perennially feeling out potential options, including in a market check prior to its IPO, but that few of its peers at the time would be enthusiastic suitors. WOW sold fiber-optic assets in the Chicago region to Verizon [NYSE:VZ] for USD 225m in 2017, and cable and telephone assets in Kansas to Midco in 2016.
Sponsor Crestview Partners is a significant shareholder in WOW, having agreed to invest USD 125m in return for a 35% stake in late 2015.
WideOpenWest and Crestview declined to comment. Bank of America and Credit Suisse did not return requests for comment.
by Jonathan Guilford, Reshmi Basu and Matt O’Brien, with additional reporting by Bhavna Kaul and Ed Mullane