Cablevision buying Western operator for $1.4B

Cablevision Systems Corp. said Monday it will pay $1.4 billion to expand far beyond its focus in the New York City area with the purchase of Bresnan Communications, a midsized cable TV provider in the West.

Cablevision will borrow most of what it needs to fund the deal, which comes at a steep price and casts some uncertainty over the widespread belief Cablevision has been priming itself for a sale. Cablevision spun off its Madison Square Garden business in February, and acquiring another business typically isn't something a company for sale would do.

Cablevision, which owns Newsday, also signaled it does not plan to go on a buying spree of other cable systems, announcing Monday it plans to buy back $500 million worth of its shares. Cablevision is "not in the market for any company or cable system that may eventually be for sale," chief executive Jim Dolan said in a conference call with financial analysts.

Bresnan has more than 300,000 customers in Colorado, Montana, Wyoming and Utah. It is majority owned by Providence Equity Partners, which led an investment group that bought Bresnan in 2003 from Comcast Corp. for $525 million.

Analysts said Cablevision is paying dearly. Jeff Wlodarczak, an analyst at Pivotal Research Group, said the price amounts to 8.5 times Bresnan's earnings before interest, taxes, depreciation and amortization. On average, publicly traded cable companies trade at 5.8 times adjusted earnings. Shares of Cablevision closed up $1.17, or 5 percent, to $24.57 in New York Stock Exchange trading. The shares had declined 5.6 percent on Thursday on speculation of the acquisition.

Cablevision said Bresnan is a good investment because its operations don't need much fixing. Moreover, Bresnan faces no competition from Verizon Communications Inc.'s FiOS fiber-optic TV and Internet service or AT&T Inc.'s U-verse. Bresnan goes up against Qwest Communications International Inc.

Cablevision structured the deal in a way that requires a relatively small outlay in cash and minimizes its exposure to a debt default. The deal is expected to be completed later this year or early in 2011. - AP