Monday, August 15, 2011

Carlyle Group to Sell Insight to Time Warner

LA Times reported:

Time Warner Cable has struck a deal to acquire Insight Communications Co. for $3 billion.The agreement, announced Monday, will add close to 700,000 cable subscribers to Time Warner Cable's 12 million customers.  Insight is currently owned by the Carlyle Group, Crestview Partners and MidOcean Partners.

For those curious about Carlyle's Insight history:

1) Carlyle announced their intent to buy Insight in April 2005 with the deal valued at $650 million.  Insight had 1.2 million subscribers at the time.  The deal closed in December 2005. 

2) Despite going private Insight continued filing reports with the SEC until January 2008.  Insight's 10-K revealed a $1.5 million annual management fee paid to Carlyle.

3) Carlyle shed a portion of Insight's business to Comcast in 2007.  The deal involved Comcast taking certain local markets and assuming $1.33 billion in debt. Insight had 1.4 million customers at the time of the split, with roughly half going to Comcast and half remaining.  After the Comcast deal closed, Insight delisted.

4) Carlyle sold a chunk of Insight to Crestview and MidOcean Partners in April 2010.  Carlyle's press release showed Insight with  775,700 customer relationships in the states of Kentucky, Indiana and Ohio.

Carlyle and company tried to sell Insight for $3.5 to $4 billion, but got no takers, given subscribers fell to 750,000.  The LA Times piece noted Insight's 700,000 cable subscribers in the $3 billion deal, while AFP stuck to the 750,000 customer number.

The political links in this deal are interesting.  Carlyle's William Kennard, a former Blue FCC chair and now America's EU Ambassador, signed prior Insight deal documents.  MidOcean Partners boasts Red George Pataki

It's not clear if Insight made any special dividends or distributions to Carlyle, Crestview or MidOcean during their period of ownership.  Did they pull the common PEU move, taking on debt to fund a distribution?  Is that why so many bidders dropped out? 

Nevertheless, parlaying half of a $650 million company into $3 billion is a pretty slick move.  Carlyle's great cash in means fewer affiliates paying management fees.  Will Carlyle model future management fees in their IPO filing?  I'm waiting for the S-1.  Digging is fun.