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Current Cable Landscape

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1 Current Cable Landscape
Citi Corporate and Investment Banking | Media April 24, 2013 Current Cable Landscape Perspectives on Value and Recent M&A Transactions Strictly Private and Confidential

2 Table of Contents 1. Public Market Update 1 2. M&A Market Update 13 3.
M&A Case Studies a. Cablevision’s Sale of Optimum West to Charter 24 b. Cogeco’s Acquisition of Atlantic Broadband 27 c. Apollo, Oaktree and Crestview’s Sale of Charter Shares to Liberty Media 30

3 Citi Corporate and Investment Banking | Media
1. Public Market Update

4 Cable Stocks Have Outperformed
1-Year Stock Price Performance Since 4/19/2012 Cable RBOC DBS S&P500 Note: Cable based on volume weighted average of Cablevision, Charter, Comcast, and Time Warner Cable. DBS based on DirecTV and Dish. RBOC based on Verizon and AT&T. 1

5 Performance Drivers Differed by Operator
Drivers of 1-Year Share Price Performance Note: Data current as of 4/19/2013. (1) Other reflects changes in minority interest, non-cable assets, unconsolidated investments and preferred shares. 2

6 EBITDA Multiples Have Increased
Public cable multiples have recovered from 2008 and private market multiples have expanded. Public and Private FV / EBITDA Multiples Over Time Cable Deal Hiatus 3 Note: Multiples represent averages. No private cable transactions announced during 2008 – 2009.

7 Public Valuations Reflect Recent Performance
Firm Value / 2013E EBITDA Cable DBS Telco Consolidated FV / ’13 EBITDA (1) (1) (1) (1) 2013E – 2015E EBITDA CAGR Source: Company filings and Wall Street research. Note: Market data as of 4/19/2013. Represents Cable Firm Value / 2013E Cable EBITDA. CVC / Charter pro forma for sale / acquisition of Bresnan. CMCSA pro forma for acquisition of 49% stake in NBCU. 4

8 Debt Markets Love Cable
Robust Financing Markets… HY CCC Index HY B Index HY BB index 10-yr Treasury Yield To Worst …That Are Highly Supportive of Cable 5

9 Large Players Focused on the Landscape
Residential (subscribers in millions) Wireless (subscribers in millions) -- Video Data Enterprise (2012 Revenue, $ in millions) Other 6 Source: Company filing, Equity Research. 9 9 9 9 9 9 9 9 9 9 9 9 9

10 Demand for Data is Primary Driver of Outperformance…
Cable is Advantaged in Reach… (US Household Fiber / Cable Coverage, HH in mm) #FiOS HH #U-Verse HH Fiber % US HH Passed Cable % US HH Passed Cable Homes Passed: 97% of HHs Telco Homes Passed: 43% HHs Initial Telco Fiber Rollout Complete …And HSD Technology (Download Speed in Mbps) Cable offers a superior product across 54% of its homes passed 7

11 …Commercial Opportunity is a Secondary Driver…
Enterprise: A $100 billion Market Opportunity… (Revenue Market Share) Cable Other Cable Operators Plan to Expand Capabilities to Drive Market Share Gains (2012E Enterprise Revenue, $ in bn) Estimated Opportunity: $25bn Acquired a CLEC and VoIP provider Estimated Opportunity: $20bn Acquired Navisite, an enterprise hosting provider Estimated Opportunity: ~$9bn in Tier 2/ 3 Cities Provides services in the New York metro area through Optimum Lightpath Recently acquired cloud communications provider Telovations Other 8

12 …Both Contributing to Revenue Growth
Revenue Growth Contribution 2011A – 2012A Growth in Revenue & Segment Growth Contribution 9

13 Growth Profiles Enhanced by “Catch-up” Opportunity
Cable Penetration % of Homes Passed; as of 12/31/12 HSD Penetration (% of HP) PSU Growth 2012A 10

14 Investors Focused on Costs
Programming Costs Increasing Faster than ARPU… % Growth Primarily Driven by Sports Rights & Retrans Fees (Affiliate Fees: ’09A – ’15E) ($bn) Sports Retrans Cable Nets ’12 – ’15 CAGR 9.2% ’09 – ’12 CAGR 8.7% 6.8% 7.2% 23.7% 27.8% 10.3% 9.1% Video Gross Profit Margin 11 Source: Wall Street research.

15 Programming Costs Pressuring Margins
Change in Programming Cost / Sub 2012A vs. 2011A EBITDA Margin 2012A EBITDA Margin Y-o-Y Change (bps) 12

16 Citi Corporate and Investment Banking | Media
2. M&A Market Update

17 Private Market Multiples Have Expanded
Average: 8.4x FV / Forward EBITDA Target: 2010 – 2011 Average Acquiror: Jun 2012 Jun 2012 Jul 2012 Jul 2012 Feb 2013 Feb 2013 13 (1) Multiple without tax adjustment.

18 Further Consolidation Likely
Current Cable Landscape (Subscribers in 000s) Cable DBS Telco 14

19 Three Groups of Acquirors
Acquiror Type Motivations Example Large Operators Leverage programming costs Reduce tax payments Operating cost reduction Charter/ Optimum West West Roll-ups / Platform Expansion Consolidate rural systems Adjacent markets Leverage SG&A costs Cogeco / Atlantic Broadband Financial Buyers Liberty / Charter Low risk investment Need leverage / scale What is exit? 15

20 Wide Range of Processes
Type of Process Broad Auction Limited Auction Bilateral Negotiation Catalyst for Process Sponsor nearing end of investment Not aligned with Company’s core markets Sponsor nearing end of investment Death of founder Focus parent’s business Prior Processes 3 Total Number of Parties Involved 7+ Did not sell 12+ 2 6 16

21 Scale is Increasingly Valuable to Operators
2012A Capex per Subscriber 2012A Programming Cost per Subscriber Largest firm pays ~20% less than smallest firms (1) (1) Programming Costs ($ per sub per month) Capex Per Subscriber (1) (1) Subscribers (mm) Subscribers (mm) 17 (1) Based on regression curve including CMCSA, CHTR, CVC, TWC DTV and DISH.

22 Synergies Have Been Meaningful
Precedent Transaction Synergies (1) Source: Company filings, Wall Street research. Represents tax shield of incremental interest cost. 18

23 Synergy Potential Will Drive View of Value
Large Strategic Mid-Sized Strategic Financial Sponsors Revenue Some Penetration? None Cost Structure % Synergy Programming 20% 5% 0% Field Costs 10% Marketing 15% Customer Service Corporate Overhead 50% 25% Other Operating Costs 2.5% Total Synergies 10 – 15% 5 – 10% 1 – 2.5% 19

24 Tax Assets Can Be Valuable
Larger Operators Looking to Reduce Taxable Income (2013E Taxable Income) Value of A Tax Step-up Can Be Attractive Illustrative $750mm Tax Step-up Example Potential Fully Utilized Value of Tax Step-up 20 (1) Based on regression curve including CMCSA, CHTR, CVC, TWC DTV and DISH.

25 Seller and Buyer Have Different Perspectives
Transaction A Transaction B 0.8x EBITDA 2.4x EBITDA (1) Includes debt and swap breakage costs and other transaction costs. 21

26 Financial Sponsors Focused on Cable Sector
Numerous Sponsors Bidding On Cable Assets What Are Sponsors Looking For? Management Team Can back existing teams Provide additional expertise Platform for Roll-ups Spreads costs across markets Increases exit alternatives “Catch-up” Opportunities Underpenetrated “rural” systems Chance to upgrade plant Scale / Leverageability Need scale and an exit Leverage required to hit returns 22

27 Returns Dependent on Scale and Leverage
Illustrative Cable LBO Minimum scale required for sufficient leverage and to preserve exit opportunities Lenders attracted to recurring free cash flow, physical assets, high margins Bond market can be accessed for additional leverage if issuance is above ~$150mm Market conditions have increased leverage available to acquirors 23

28 Citi Corporate and Investment Banking | Media
3. M&A Case Studies

29 a. Cablevision’s Sale of Optimum West to Charter
Citi Corporate and Investment Banking | Media a. Cablevision’s Sale of Optimum West to Charter West

30 Charter / Optimum West Transaction Overview
Process On February 7th, 2013, Cablevision Systems Corporation entered into a definitive agreement to sell Bresnan Broadband Holdings, LLC (“Optimum West”) to Charter Communications Inc. for $ billion Purchase price represents 10.0x Optimum West’s LTM Adjusted Operating Cash Flow Optimum West serves approximately 366,000 customers in Montana, Colorado, Wyoming and Utah Cablevision had acquired Bresnan in June for $1.4 billion (8.1x LTM EBITDA) Citi advised Cablevision on the transaction Limited number of targeted participants 13 weeks from beginning of process to signing Distribution of information package in first round Full diligence in second round Implied Transaction Multiples 24

31 Optimum West Asset Overview
Geographic Overview Key Operating Metrics (September 30, 2012) Metric Performance Premises Passed 665,500 Basic Penetration (% of Premises Passed) 45.7% Digital Penetration (% of Basic Subscribers) 83.3% HSD Penetration 42.9% Voice Penetration 25.4% 3-Product Bundling(1) 40.6% % above 750 MHz 90.0% Principal Competitors CenturyLink (No IPTV video offering) DirecTV, DISH Montana Kalispell Havre Missoula Great Falls Helena Billings Bozeman Sheridan Cody Gillette Jackson Casper Wyoming L a r a m i e Cheyenne Grand Junction Cedar City Canon City Durango Lamar Utah Colorado Optimum West Headends Optimum West States Served (1) 3-product bundling defined as the percentage of unique customers who subscribe to three of Optimum West’s core products (video, HSD, voice). 25

32 Optimum West Transaction Rationale
Attractive Markets Strong household and population growth High levels of employment and stable economic base Significant new home construction Strong Competitive Position and Unmatched Product Offering Market leader in video and HSD with 45.7% and 42.9% penetration, respectively In the areas it serves, Optimum West is the only integrated triple-play provider in the market (CenturyLink has limited HSD speeds (3 Mbps) and no proprietary video product) Fully Upgraded, High Quality Systems Carrier class plant and network with 90% two-way 750 – 860 MHz capacity State-of-the-art Network Operations Center, Regional Operations Center and principal call centers all within Optimum West’s footprint Significant Investment and Operating Improvements by Cablevision $80 million in capital to migrate off net2phone, introduce higher HSD speeds and connect additional headends Revamped sales and marketing team by adding door-to-door sales resources and dedicating resources to SMB, bulk and Enterprise customer segments 26

33 b. Cogeco’s Acquisition of Atlantic Broadband
Citi Corporate and Investment Banking | Media b. Cogeco’s Acquisition of Atlantic Broadband

34 Transaction Overview Overview Key Terms
On July 18th, 2012, Cogeco announced the acquisition of Atlantic Broadband (“ABB”) for $1.36 billion in cash Transaction valued at 8.8x forward EBITDA (8.3x net of tax structure) Cogeco is a leading cable operator based in Montreal, Canada Atlantic Broadband is the 14th largest cable provider in the U.S., serving 251,000 basic cable subscribers ABB was previously owned by ABRY Partners and Oak Hill Capital Partners (acquired from Charter in 2004) Structure provides meaningful tax benefits back to Cogeco Cogeco will acquire 100% of ABB in an all-cash deal Cogeco received incremental financing for $660mm of the purchase price Cogeco funded the remaining portion of the purchase price with cash and its own credit facility Transaction closed in December 2012 Implied Transaction Multiples 27

35 Atlantic Broadband Asset Overview
Business Overview Key Operating Statistics (As of 6/30/2012) 14th largest cable provider in the U.S. Technologically advanced network ~7,900 miles of network plant with an average density of 65 homes per mile 92% of the platform fully upgraded to all digital or operating 750MHz capacity or higher DOCSIS 3.0 covers 85% of homes passed 98% of homes passed are internet and telephone ready and two-way connection capable Source: Company materials. (1) As a percentage of homes passed. Geographic Footprint (As of 6/30/2012) Atlantic Broadband Headquarters Quincy, MA Western Pennsylvania Homes Passed: 243,177 Basic Customers: 122,419 Maryland/Delaware Homes Passed: 60,530 Basic Customers: 21,126 Aiken (South Carolina) Homes Passed: 56,114 Basic Customers: 22,641 Miami Beach Homes Passed: 155,525 Basic Customers: 85,532 Note: Basic Customers include Basic Television and Digital Video customers. 28

36 Atlantic Broadband Transaction Rationale
Attractive Entry into U.S. Markets 7,900 miles of network with average density of 65 homers per mile Underpenetrated markets imply room for growth Less competitive markets suggest ability to maintain pricing High Quality Network Infrastructure 92% of platform was fully upgraded to all digital or operating at 750MHz or higher DOCSIS 3.0 covers 85% of ABB’s homes passed Commercial Growth Opportunity ~30% commercial revenue CAGR despite having less than 10% of market share Approximately 40,000 businesses within existing network Provides Platform for Future Growth Platform allows Cogeco to explore other ways to deploy capital in the U.S. cable sector Neighboring markets facing limited competition as well 29

37 Citi Corporate and Investment Banking | Media
c. Apollo, Oaktree and Crestview’s Sale of Charter Shares to Liberty Media

38 Apollo, Oaktree and Crestview’s Sale of Charter Shares to Liberty Media
Overview Pro Forma Ownership On March 19, 2013, Apollo, Oaktree, and Crestview entered into a definitive agreement with Liberty Media to sell 26.9 million shares and 1.1 million warrants of Charter Communications for $2.617bn Shares were sold for $95.50 per share, representing a premium of 6.0% to Charter’s closing share price on March 15th, 2013 Values Charter at 8.0x FV / 2013E EBITDA The transaction is expected to close in the first half of the 2nd quarter of 2013 Citi acted as financial advisor to Apollo and Oaktree on this transaction Implied Valuation of Charter Governance Under the terms of the stockholder’s agreement, Liberty Media has the right to name up to four directors Liberty is restricted from acquiring a stake exceeding 35% until January 2016 and 39.99% into perpetuity 30 (1) Total proceeds includes warrants.

39 Charter Asset Overview
Business Overview Fourth largest U.S. cable operator based on homes passed and basic video customers Diverse geographic footprint spread across mid-tier metropolitan and rural areas Thomas Rutledge joined as CEO in Nov 2011 and has hired other legacy Cablevision key executives Significant capital invested in plant upgrades Key Operating Stats 4,197,000 basic video subs (1) 3,484,000 digital video subs 3,917,000 high speed data subs 1,979,000 telephone subs 13,577,000 total RGUs Geographic Footprint (As of 12/31/2012) 31 (1) Includes commercial video and residential video.

40 Charter Transaction Rationale
Strong Cable Operating Experience Investment in Charter represents a re-entry into U.S. cable market (Sold TCI to AT&T in 1999) Liberty Global owns numerous international cable assets across 13 countries Consistent with Liberty Media Investment Strategy Best opportunity for re-entry for Liberty Media as large stake with governance rights could be acquired at a modest premium Charter operations large enough to benefit from scale with a path to more over time Capital Investment Has Been Made Charter’s owners have made significant capital investments in infrastructure upgrades Liberty investment comes at time when Charter is primed for growth 32

41 Citi Corporate and Investment Banking | Media
Q&A 33

42 Christina Mohr Managing Director, Mergers & Acquisitions
Citi Corporate and Investment Banking | Media Citi Contact Information Christina Mohr Managing Director, Mergers & Acquisitions Office: 1 (212) Derek Van Zandt Managing Director, Global Communications Group Office: 1 (212) 34

43 efficiency, renewable energy and mitigation
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