Cable One, Inc. has entered into a definitive agreement to acquire the equity interests in Hargray Acquisition Holdings, LLC (“Hargray”) that it does not already own. The equity interests to be acquired by Cable One represent approximately 85% of Hargray on a fully diluted basis. Cable One has been a minority investor in Hargray since October 1, 2020, when the Company contributed its system serving Anniston, Alabama and surrounding areas to Hargray in exchange for equity interests representing approximately 15% of Hargray on a fully diluted basis. The transaction, which implies a $2.2 billion total enterprise value for 100% of the equity interests of Hargray on a debt-free and cash-free basis, will expand Cable One’s presence into the Southeastern U.S. and enable Cable One to capitalize on Hargray’s experience and expertise in fiber expansion.
Hargray is a facilities-based regional communications provider serving residential and business customers in 14 markets across Alabama, Florida, Georgia, and South Carolina. Hargray offers gigabit-capable services to approximately 99% of its customers. Approximately 60% of Hargray’s total revenues for the 12-month period ended December 31, 2020 were derived from residential data and business services customers.
“We look forward to further partnering with Hargray to extend our presence in the Southeast through Hargray’s fast-growing markets, like-minded strategy, and commitment to providing fast and reliable internet service to rural markets,” said Julie Laulis, Cable One President and CEO. “This transaction will also serve as a potential platform for future organic and inorganic growth in the region as we look to continue to expand our footprint.”
Michael Gottdenker, Hargray Chairman and CEO, said, “Cable One and Hargray have remarkably similar cultures, starting with each company’s focus on delighting its customers. Having led Hargray for nearly 14 years, and having gotten to know Cable One well over the past few years, I am excited about this transaction and am confident that our colleagues, customers, and communities will continue to thrive under Cable One’s ownership.”
Hargray generated approximately $128 million in Adjusted EBITDA on an annualized basis for the quarter ended December 31, 2020 (“4Q LQA”). Cable One expects to realize approximately $45 million in estimated annual run-rate synergies within three years of closing the transaction.
The purchase price represents multiples of Hargray’s 4Q LQA Adjusted EBITDA of:
17.2x before taking into account estimated run-rate synergies; and
12.7x after assuming the immediate realization in full of the $45 million in estimated run-rate synergies that Cable One expects to realize within three years of closing the transaction.
Hargray’s 4Q LQA net loss was approximately $28 million. The financial results for Hargray in this press release have been derived from unaudited financial information prepared by Hargray, without adjustment to conform to the accounting policies and methodologies used by Cable One. The accounting policies and methodologies used by Hargray differ in certain respects from those used by Cable One, but Cable One does not believe these differences are material. The financial results for Hargray presented on a 4Q LQA basis represent Hargray’s net loss or Adjusted EBITDA for the quarter ended December 31, 2020 multiplied by four.
Cable One intends to finance the transaction with a combination of existing cash resources, revolving credit facility capacity, and proceeds from new indebtedness and/or equity capital. Cable One has received $900 million of definitive bridge loan commitments from J.P. Morgan and Credit Suisse to finance a portion of the purchase price.
The transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to be completed during the second quarter of 2021.
Credit Suisse acted as lead financial advisor to Cable One, and J.P. Morgan also acted as financial advisor to Cable One. Cravath, Swaine & Moore LLP acted as legal advisor to Cable One on this transaction.