The consolidation of the nation's Tier 2/3 MSOs continued Wednesday as WideOpenWest Holdings LLC (WOW) plunked down US$1.5 billion in cash to acquire Knology Inc., a cable overbuilder that's been on a mini-M&A tear of its own. (See WOW! Buys Knology .)

With the addition of Knology, WOW will become the nation's thirteenth-largest pay-TV operator, with about 800,000 customers and 2.8 million homes passed in 13 states combined.

There's no system overlap, as both companies primarily operate cable networks that compete with incumbent MSOs such as Comcast Corp., Bright House Networks, Charter Communications Inc., Mediacom Communications Corp. and Time Warner Cable Inc., depending on the market. WOW's current footprint touches parts of Michigan, Illinois, Ohio and Indiana, while Knology serves pockets of Iowa, Kansas, Minnesota, South Carolina, South Dakota and Tennessee.

WOW is paying $19.95 per share, a 34 percent premium on Knology's average closing share pricing during a three-month period in which reports have speculated that WOW was preparing a bid for Knology. Knology shares were up $1.27 (7.04%) to $19.32 in early trading Wednesday. (See Knology Surges on M&A Speculation .)

Knology ended 2011 with 1,861 full-time employees, according to its 10-K. WOW Chief Marketing Officer Cathy Kuo declined to comment on any potential organizational changes coming as a result of the deal, but noted that the WOW and Knology teams will be working together over the next couple months on future plans.

Why this matters

The combination gives WOW more scale, which could help in programming and equipment negotiations and help it compete with much larger MSO and satellite TV rivals. Knology is also getting access to an upgraded broadband infrastructure and to new markets such as wireless backhaul. Knology, for example, has invested $9.7 million since 2009 to grab a 12 percent stake in Tower Cloud Inc.

It also marks another round of consolidation for the nation's Tier 2/3 MSOs. Knology has typically been on the buying end of that, as it has recently acquired Sunflower Broadband and Private Cable Co. LLC. More M&A moves may be on the way, as Wave Broadband is also reported to be on the block.

For more

• Knology Plucks Sunflower
• Consolidated to Buy SureWest for $340.9M
• TW Cable Closes Insight Buy
• WOW & Wave Broadband Divvy Up Broadstripe

— Jeff Baumgartner, Site Editor, Light Reading Cable