U.S. cable operator RCN has agreed to be acquired by private equity firm ABRY Partners for approximately US$1.2 billion, the companies said Friday.
RCN provides all-digital “triple play” Internet, voice and digital TV services to approximately 430,000 households and small and midsized businesses, primarily in Chicago and five markets in the Northeastern U.S. It claims to be the largest all-digital cable operator in the U.S. Through its RCN Metro Optical Networks unit, the company sells high-capacity data services to large enterprises and carriers.
ABRY Partners, a firm based in Boston that focuses on media and communications investments, will acquire RCN with a combination of its own equity and debt financing from a set of partners. The price it agreed to pay, $15 per share in cash, is a 43 percent premium over RCN’s average closing share price over the past 30 days. The deal is subject to approval by shareholders and regulators, including the U.S. Federal Communications Commission, and is expected to close in the second half of this year. For the next 40 days, RCN is allowed to solicit other offers.
In the third quarter of 2009, RCN lost $6 million on revenue of $192 million. That represented progress from its results from a year earlier, when it had reported a loss of $15 million on revenue of $187 million. It has debt of $730 million.
The company is in a growth phase but its stock price has been held back because the cable and optical businesses should really be valued separately, RCN President and CEO Peter Aquino said in an interview. ABRY wants to separate those businesses to “unlock” the value in RCN, Aquino said.
RCN’s primary markets for triple-play services are Washington, D.C., Philadelphia, New York City, Boston, Chicago and Pennsylvania’s Lehigh Valley. Because its network is fully digital, the company can provide more than 100 high-definition TV channels and hundreds of video-on-demand offerings, Aquino said. Its Internet service provides a maximum of 20M bps (bits per second) across all the markets and is being upgraded with DOCSIS 3.0 technology to deliver as much as 60M bps, he said. The change in ownership should not affect customers, he said.