Cable One buys New Wave for $735M in ‘man bites dog' deal

Cable One installer
Cable One said it will finance the deal with $650 million of senior secured loans and cash on hand.

Surprising the broader telecom industry by emerging as a buyer and not a purchase target, Cable One has acquired Sikeston, Missouri-based cable operator NewWave Communications for $735 million in cash. 

The deal will expand Phoenix-based Cable One’s footprint by residential 214,000 subscribers in nonurban areas of Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas. NewWave also touts 31,000 business subscribers and 428,000 residential passings. 

With Cable One long rumored to be an acquisition target of Altice USA, the deal represented a “man bites dog” scenario, according to MoffettNathanson principal analyst Craig Moffett. Still, the NewWave buy doesn’t preclude any Altice deal later, he noted. 

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“Cable One has periodically indicated their interest in applying their unconventional broadband-first/video-lite strategy to potential targets,” Moffett said in a note to investors this morning. “And getting bigger, given their small starting scale, certainly doesn't preclude eventually being acquired themselves. It arguably only makes it more likely, at least over the long term."  

The deal is valued at 11.5 times New Wave’s $64 million annualized cash flow for the fourth quarter—before cost synergies, etc. (The valuation methodology is explained in all its complicated glory here in the press release.)

Cable One said it will finance the deal with $650 million of senior secured loans and cash on hand. 

Indeed, perhaps the biggest surprise in Cable One's announcement isn’t that they are buying rather than selling. It is that the $735M transaction is all cash, Moffett noted. 

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

Added Phil Spencer, CEO of NewWave: “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. 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.”