Leveraged buyout group Abry Partners snapped up Cable Michigan Inc. for $435 million in cash Thursday in the latest indication that a new round of consolidation of cable systems is underway.
Cable Michigan is a 210,000-subscriber group of systems in Michigan that was spun off as a separate publicly traded company by its former parent C-TEC Corp. last September.
The deal is a coup for the company’s shareholders, who will receive $40.50 a share compared with the stock price of Cable Michigan last September of $16. Cable Michigan stock jumped $3.18 to $38.43 Thursday.
The acquisition gives Abry a significant base in cable for the first time. Best known for its investments in TV broadcasting, Abry is buying Cable Michigan through its new cable arm Avalon which it set up with money from its latest media fund Abry Broadcasting Partners III that raised $575 million last year.
Peggy Koenig, an Abry partner, said Abry spent a year talking with potential management teams before settling on two former cable execs, Joel Cohen and David Unger, who were, at the time, negotiating to buy some systems in Connecticut and Massachusets that are now part of Avalon.
Abry’s investment in the sector is part of a broader move into cable by a host of investment groups over the past year, spurred by Microsoft’s $1 billion investment in Comcast Corp. and perceptions that competitive threats to cable from satellite TV and telcos had diminished.
Recent months have seen several big cable acquisitions, including Paul Allen’s purchase of Marcus Cable for $2.8 billion, Comcast’s purchase of a controlling stake in Jones Cable and Cox Communications’ acquisition of Prime Cable’s Las Vegas system.
In a statement, Cable Michigan chairman David McCourt said the company “began exploring strategic alternatives last month,” beginning the process that led to the deal. Koenig said the strategic review was itself prompted by an approach from Avalon, adding that Avalon had preempted a full action with its cash bid.
Montgomery Securities analyst John Tinker, who recommended the stock after Cable Michigan management appeared at Montgomery’s annual media conference last year, said in a recent report the stock was worth $38.