Cable One is expanding through acquisitions again, this time inking a deal to acquire the equity interests of Hargray Acquisition Holdings that it does not already own.
The deal comes together roughly four months after Cable One grabbed a minority stake in Hargray through a transaction that had Cable One contribute its Anniston, Alabama-area systems to Hargray in exchange for a 15% piece of the company.
The new deal, which will have Cable One acquire the rest of Hargray, implies a $2.2 billion total enterprise value for 100% of the equity interests of Hargray on a debt-free and cash-free basis, the companies said. Cable One has received $900 million of definitive bridge loan commitments from J.P. Morgan and Credit Suisse to finance a portion of the purchase price. The deal is expected to close during Q2 2021.
The transaction will effectively expand Cable One's presence into the southeastern US. Hargray serves 14 markets in Alabama, Florida, Georgia and South Carolina. Those markets include cities like Adel Conyers, Covington, Hahira, Macon, Savannah, and Hinesville in Georgia; Beaufort, Bluffton, and Hilton Head in South Carolina; and Jacksonville, Tallahassee, and Lake City in Florida.
Cable One said the deal will also capitalize on Hargray's experience, expertise and fiber expansion. Hargray offers 1-Gig service to roughly 99% of its customer base. It is currently offering 1-Gig downstream, 50 Mbit/s upstream for $115 per month for the first 12 months.
Hargray generated about $128 million in adjusted EBIDTA on an annualized basis for the quarter ended December 31, 2020, and a net loss of $28 million. Cable One expects to realize roughly $45 million in annual run-rate synergies within three years of closing the deal.
"This transaction will also serve as a potential platform for future organic and inorganic growth in the region as we look to continue to expand our footprint," Julie Laulis, Cable One's president and CEO, said in a statement.
The deal enters the mix as Cable One, which has rebranded as Sparklight, continues to morph into a network-agnostic service provider. In addition to serving homes and businesses with hybrid fiber/coax (HFC) and fiber-to-the-premises (FTTP) networks. Cable One has expanded into fixed wireless through recent investments in Wisper Internet and NextLink.
The Hargray transaction continues a recent string of M&A for Cable One, which last fall struck a deal to acquire a 45% stake in Mega Broadband Investments Holdings (MBI), with the potential to acquire all of MBI starting in 2023. MBI was formed through the acquisitions of Vyve Broadband, Northern Communications and the broadband assets of Eagle Communications.
Among other recent moves, Cable One acquired ValueNet Fiber of Emporia, Kansas, last year; Fidelity Communications in 2019; and Clearwave Communications in 2018.
Cable One expects to provide more detail about the Hargray transaction when it reports Q4 2020 results on February 25.
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— Jeff Baumgartner, Senior Editor, Light Reading