Cable ONE to acquire NewWave Communications

Wednesday, January 18th, 2017
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Estimated annual cost synergies of $24 million and tax benefit value of approximately $152 million

PHOENIX — Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today announced it has entered into a definitive agreement to acquire NewWave Communications (“NewWave”) for $735 million in cash. NewWave is owned by funds affiliated with GTCR LLC, a leading private equity firm based in Chicago.

NewWave is a cable operator providing high-speed data, video and voice services to residential and business customers throughout non-urban areas of Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas. NewWave’s network passes nearly 428,000 homes and has more than 214,000 residential primary service units (“PSUs”) and 31,000 business PSUs. NewWave is headquartered in Sikeston, Missouri.

“We are excited about our acquisition of NewWave, which operates in non-urban markets similar to ours and has significant high-speed data (“HSD”) and business services opportunities that we are well-positioned to execute on,” said Julie Laulis, President and CEO of Cable ONE. “The transaction represents an attractive opportunity to utilize Cable ONE’s existing balance sheet capacity for a value-enhancing acquisition.”

Together, Cable ONE and NewWave will serve more than 1.2 million PSUs. NewWave has fully-upgraded systems and a high capacity plant, including more than 10,500 network plant miles and over 3,700 fiber miles, capable of delivering top-tier speeds and services. NewWave provides an attractive opportunity for growth in residential HSD and business services revenues due to relatively low HSD penetration in its markets.

“It has been my great pleasure to lead the NewWave team these past several years, and I am proud of the hard work of our employees and their many accomplishments,” said Phil Spencer, CEO of NewWave. “Over the last four years we have invested significant capital to upgrade our networks, roll out 100 Mbps internet service and enhance our business services. We are excited to become a part of the Cable ONE team. We both share a common vision and commitment to bring high-quality products and services to the communities we serve.”

After giving effect to the transaction, Cable ONE would have had last quarter annualized (“LQA”) revenues of approximately $1 billion for the third quarter of 2016 and would remain among the industry leaders with LQA Adjusted EBITDA margins of approximately 41% for the third quarter of 2016 prior to the impact of annual cost synergies, which Cable ONE estimates at approximately $24 million. Furthermore, the acquisition is expected to provide estimated tax benefits of approximately $152 million on a present value basis.

The purchase price of $735 million represents multiples for NewWave based on estimated LQA Adjusted EBITDA of $64 million for the fourth quarter of 2016 of (i) 11.5x before adjusting the purchase price for the present value of anticipated tax benefits and without taking into account any additional Adjusted EBITDA from the realization of estimated run-rate cost synergies, (ii) 8.4x after assuming the immediate realization in full of $24 million of estimated run-rate cost synergies (but before adjusting the purchase price for the present value of anticipated tax benefits) and (iii) 6.6x after adjusting the purchase price for the present value of anticipated tax benefits and assuming the immediate realization in full of $24 million of estimated run-rate cost synergies. Cable ONE’s net income for the third quarter of 2016 was approximately $21 million and NewWave’s net loss for the third quarter of 2016 and estimated net loss for the fourth quarter of 2016 were approximately $3 million and $3 million, respectively. NewWave’s estimated results for the fourth quarter of 2016 are preliminary results and actual results may differ from those provided herein due to the completion of financial closing procedures, application of final adjustments, review by NewWave’s independent auditor and other developments.

The financial results for NewWave in this press release have been derived from the unaudited financial statements prepared by NewWave, without adjustment to conform to the accounting policies and methodologies used by Cable ONE. The accounting policies and methodologies used by NewWave differ in certain respects from those used by Cable ONE, but Cable ONE does not believe these differences are material to the combined company.

Transaction Details

The transaction is expected to be financed with $650 million of senior secured loans and cash on hand. The transaction is subject to customary regulatory closing conditions and is expected to be completed during the second quarter of 2017.

J.P. Morgan acted as financial advisor, and Cravath, Swaine & Moore LLP acted as legal advisor to Cable ONE on this transaction.

Additional Information Available on Website

A presentation containing additional information with respect to the acquisition has been furnished to the Securities and Exchange Commission and is posted on the Cable ONE Investor Relations website.

Questions regarding this transaction will be addressed during the Cable ONE Fourth Quarter and Full Year 2016 earnings call in February 2017.