First Round Bids Expected for Insight Communications

Insight Communications Co., which is owned by The Carlyle Group, is expecting a first round of bids in the next two weeks, as the company gears up to sell itself, Reuters reported. Insight Communications is the ninth-largest cable operator in the U.S., and an auction is expected to fetch between $3.5 billion and $4 billion. Blackstone Group, BC Partners, CVC Capital Partners, Hellman & Friedman and KKR are widely expected to participate, Reuters wrote.

(Reuters) – Insight Communications Co, controlled by The Carlyle Group, is expected to receive first-round bids over the next two weeks as part of its sale process, three sources familiar with the situation said.

The country’s ninth-largest cable operator in the United States had hired Bank of America Merrill Lynch (BAC.N) and UBS AG (UBS.N) in March to run the company sale process.

Pitch books were sent to to a range of potential suitors including cable companies and private equity firms to test how the market will value the asset, one of the sources said. The bid deadline is early to mid-May, said that source.

Financial backers of Insight, which hope to fetch $3.5 billion to $4 billion, eye an opportunity to cash out their investment as larger cable companies look to consolidate small and medium-sized cable systems.

Private equity firms that have been eager to build their portfolio of cable assets are expected to lead the bidding. Blackstone Group (BX.N), BC Partners [BCPRT.UL], CVC Capital Partners [CVC.UL], Hellman & Friedman and KKR (KKR.N) are widely expected to participate, a second source said.

“You’ve got a robust level of interest right now. Most every sponsor of meaningful size has signed nondisclosure agreements and is going to take a look,” the second source said.

Cable companies Cablevision Systems Corp (CVC.N) and Charter Communications Inc (CHTR.O) are also expected to review a possible bid.

Time Warner Cable Inc (TWC.N), balked over the high price and has decided against participating, one person familiar with the talks said.

Suddenlink, also earlier identified as a possible bidder, is not involved in the talks to buy Insight, according to a person familiar with the discussions. Its parent company recently raised around $625 million in debt financing to help close its acquisition of NPG Cable, and is expected to need to reduce its debt before making another sizeable acquisition.

Bank of America and UBS are providing a staple financing, or a pre-financing lending package to prospective buyers, in the range of 6.5-to-6.75-times debt to earnings before interest, taxes, depreciation and amortization (EBITDA), said two sources.

Lenders are letting private equity buyers pay as little as 25 percent in equity to finance the transaction, one source said. That would bring the equity-to-debt split back to levels unseen since the leveraged buyout boom in 2006.

“One of the benefits for lenders is that even through all the downturn, really no one has lost money on cable,” a third source familiar with the situation said.

Washington D.C.-based Carlyle bought Insight for $2.1 billion, including debt, in a December 2005 management-led leveraged buyout.

Last April, Insight announced an investor group led by Crestview Partners and MidOcean Partners purchased a significant stake in the cable company from existing shareholders, including Carlyle. Carlyle and the new investor group each hold an equity interest of about 42 percent in Insight.

Insight sells cable television, high-speed Internet and telephone services to its customers, serving around 750,000 in Illinois, Indiana, Kentucky and Ohio. (Reporting by Nadia Damouni and Yinka Adegoke; editing by Kenneth Li, Dave Zimmerman)