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Major US cableco sold for $8 billion in private equity game of pass-the-parcel

Astound Broadband is changing ownership via an US$8.1 billion deal, including debt, between a pair of private equity investors.

TPG Capital and management partner Patriot Media Management are selling the sixth largest cable operator in the US to Stonepeak Infrastructure Partners, a PE firm that specialises in investing in infrastructure assets.

Astound is the name given to a cable collective in the US, made up of RCN Telecom Services, Grande Communications, Wave Broadband and the recently-added EnTouch Systems. RCN, Grande and Wave passed the 1 million customers milestone in September and just days later added EnTouch to the group with its 22,000 customers in the Houston, Texas area. The companies serve eight of the top 10 metro areas in the US, with 23,000 miles of fibre mainly on the eastern and western seaboards.

The group has grown quickly since TPG bought RCN and Grande almost four years ago for x and y respectively. But despite claiming to be in the top half dozen in the US, it clearly lacks some scale compared with the big guns. Cable giant Comcast had 32.7 million residential and business customer relationships at the end of September, including 27.8 million residential high-speed Internet customers, while Charter’s customer relationships totalled 30.9 million as of Q3 with 26.8 million residential Internet accounts.

Nonetheless, as the private equity interest demonstrates, the outfit clearly has some growth potential.

According to unnamed sources cited by Bloomberg, Stonepeak beat off interest from a consortium of fellow PE investors made up of I Squared Capital and Blackstone Group. And the newswire also pointed out that at almost $8,000 per broadband subscriber, the $8 billion-plus purchase price puts Astound in the same bracket as Charter.

But Astound has ambitions.

“We have created a market leading broadband platform with national reach, broad capabilities and expertise, and exciting growth potential,” said Jim Holanda, CEO of Astound, founder of Patriot Media and former Charter employee. “We are very eager and excited to partner with a premier investor such as Stonepeak to further accelerate our growth and take our companies to new levels of customer satisfaction and performance.”

As part of the partnership with Stonepeak, Patriot Media said it will continue to plough significant investment into the network and technology underpinning the various Astound businesses, enabling them to expand their infrastructure and deliver Gigabit broadband services. Patriot Media’s involvement with the group dates back to 2010 when it took on management responsibilities for RCN. It will continue to manage the group on completion of the transaction, which is earmarked for the second quarter of next year, subject to various closing conditions and regulatory approvals.

The reshaping of the market for video and high-speed Internet services in the US, with its various mega-deals and asset disposals, has been interesting to watch in recent years. Private equity interest in smaller players may not be in the same ballpark as Charter’s $56.7 billion Time Warner Cable deal in 2016, for example, but it’s clear that there is still plenty of interest in investing in this space and there is little sign of it dying down any time soon.

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