TPG shopping RCN, Grande and Wave Broadband for $8B – reportTPG shopping RCN, Grande and Wave Broadband for $8B – report

In a move that would spark another wave of consolidation within the US cable industry, private equity firm TPG Capital is sizing up a sale of its Astound service provider conglomerate for more than $8 billion, Reuters reported.

The Astound assets span a set of midsized cable operators – RCN, Grande Communications and Wave Broadband – that serve portions of Chicago, California, New York, Massachusetts, Oregon, Pennsylvania, Texas and Washington.

TPG snapped up Wave Broadband for $2.36 billion in 2017, and RCN and Grande for $2.25 billion in 2016. In February, TPG inked a much smaller deal – for EnTouch Systems, an operator that serves about 22,000 customers in the Houston area and complements Grande's footprint in Texas.

TPG has hired both Morgan Stanley and JPMorgan Chase & Co. as advisors, according to Reuters.

TPG is reportedly seeking a sale of the Astound assets as cable operators continue to dominate the US broadband market and have seen broadband subscriber growth accelerate sharply during the pandemic as people work and school from home. According to Leichtman Research Group, the nation's top cable operators tacked on about 1.4 million broadband subs in Q2 2020, up from a net gain of 530,000 in the year-ago quarter.

Anyone willing to wheel and deal?
Reuters did not speculate on who might be willing to pay such a princely sum for its blend of service providers, which include cable "overbuilders" that compete directly with incumbent cable operators and telcos, depending on the market.

Among small and midsized operators, Cable One has been opportunistic with M&A, but is not in position to buy something this big. Among recent moves, Cable One acquired a small, Kansas-based service provider called ValueNet Fiber early this year, Fidelity Communications last year for $525 million, NewWave Communications in 2017 for $735 million, and Clearwave Communications in 2019. Cable One has also invested in two relatively small fixed wireless companies – Wisper and NextLink.

Craig Moffett, analyst with MoffettNathanson, has argued that Cable One will need to make successful acquisitions to grow into the company's relatively high valuation. However, the money put up by Cable One for its recent string of acquisitions is a far cry from the value TPG is reportedly seeking through its exploration centered on the Astound assets. However, it's not yet clear if TPG would be willing to break the Astound assets into pieces and try to sell them to multiple buyers that are operating networks in nearby or adjacent regions.

Charter Communications and Altice USA might also be on the hunt for potential M&A, but the competitive overbuilder aspects of TPG's holdings could prove problematic in certain geographies.

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— Jeff Baumgartner, Senior Editor, Light Reading