Signaling another wave of consolidation involving a rural-focused part of the US cable industry, Cable One has inked a deal to acquire a 45% stake in Mega Broadband Investments Holding (MBI), with the potential to snap up the whole kit and caboodle beginning in 2023.
Under a "strategic partnership" announced Monday, Cable One will acquire that stake in MBI for $574.1 million in cash from affiliates of private equity firm GTCR. Cable One also has the right to purchase the remaining interests in MBI "at a predetermined multiple of earnings," starting in 2023.
MBI was formed through a string of acquisitions including Vyve Broadband, Northland Communications and the broadband assets of Eagle Communications. Those acquisitions, now operating under the Vyve Broadband brand, provide service to about 630,000 homes in rural parts of Alabama, Arkansas, California, Colorado, Georgia, Idaho, Kansas, Louisiana, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Washington and Wyoming. Cable One serves more than 900,000 customers in parts of 21 states.
MBI noted that it has recently upgraded systems with more than 15,800 network plant miles that enable it to deliver 1-Gig speeds across its footprint.
"This strategic investment in MBI reflects a continuation of our commitment to provide rural America with reliable high-speed internet service," Julie Laulis, Cable One's president and CEO, said in a statement. "MBI has developed an excellent network in geographies complementary to our existing footprint and we are excited to share in its future growth."
Cable One, which has deemphasized pay-TV as it shifts its focus to higher-margin broadband services, said it expects to wrap the deal in Q4 2020 and fund the deal with cash on hand.
A flurry of M&A
In addition to driving more broadband investment in the rural US, the deal with MBI also gives Cable One the potential to continue an expansion strategy based on various forms of M&A and a network-agnostic approach that targets service providers that use a mix of HFC, fiber and fixed wireless networks.
Of recent note, Cable One acquired stakes in two fixed wireless ISPs – NextLink and Wisper – that both happen to be Connect America Fund phase II winners. In July, Cable One struck a deal to snare a minority equity stake in Hargray Communications and, before that, snapped up ValueNet Fiber, an Emporia, Kansas-based provider of broadband and video services.
Cable One is also among a group of cable operators that bid for and won CBRS spectrum.
Cable One isn't the only US cable operator that's been sizing up M&A moves. Altice USA, for example, has made a a so-far unsuccessful bid for Montreal-based Cogeco, with a plan to retain Cogeco's US assets (Atlantic Broadband) and sell Cogeco's Canadian assets to Rogers Communications.
TPG Capital, meanwhile, is reportedly touting the sale of Astound, a conglomerate of midsized cable operators that includes RCN, Grande Communications and Wave Broadband.
- Cable One invests in two fixed wireless ISPs
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- Cable One Deals for Clearwave Communications
- Cable One Bulks Up With $525.9M Fidelity Buy
- Cogeco to Altice USA and Rogers: No means no
— Jeff Baumgartner, Senior Editor, Light Reading