Broadband Cable Association of Pennsylvania


August 9, 2012

The cable company that serves the Altoona-Johnstown area is being purchased by a Canadian firm. Atlantic Broadband LLC, whose lines "pass" 108,000 homes in this area, entered into a stock purchase agreement in July with Cogeco Cable Inc. of Montreal, according to a letter received by the City of Altoona, where Atlantic Broadband has a cable franchise. "This change in ownership does not affect the management or operations of our cable systems, nor will it change our rates and services," stated Atlantic's general counsel, Bartlett Leber, in the letter. Cogeco, which dates to 1972, serves 877,000 basic cable customers in Quebec and Ontario, according to a profile on the Cogeco website.

Atlantic Broadband, founded in 2003 and headquartered in Quincy, Mass., is the 14th largest cable TV system operator in the U.S., serving customers in four major clusters in western Pennsylvania, Miami Beach, Maryland and Delaware, and in Aiken, S.C., according to its website. The takeover will allow Atlantic "to continue our service improvements and innovative product offerings," the letter to the city states. The new firm will serve more than 1.1 million basic video customers in Canada and the U.S., the Wall Street Journal reported. Cogeco plans to finance the purchase with cash, $550 million from a credit facility and $660 million in "borrowings under committed debt financing at Atlantic Broadband," according to the Journal. Officials at both companies did not return calls Wednesday. Altoona Mirror

Liberty Media Corp. said it will split into two companies, dividing its Starz unit from its investment portfolio, setting the stage for the premium-TV channel business to merge with another company.

Starz comprises the Starz and Encore networks, which have long struggled to compete with more-profitable rivals including Time Warner Inc.'s HBO and CBS Corp.'s Showtime. Consolidation of the premium-cable channel sector has been seen as a possibility for years. "This should give Starz a more appropriate capitalization and will enable it to operate independently or eventually merge with an entertainment conglomerate with studio operations," said Vijay Jayant, an analyst with ISI.

The planned split is the latest in a long series of restructurings done by Liberty Chairman John Malone's business empire. Over the past decade, restructurings have turned a conglomerate into several smaller but separate companies, including Liberty Global and Liberty Interactive. Only a few months ago Liberty combined two tracking stocks that reflected the economic performance of Starz and the investment portfolio. Tracking stocks don't involve legal separation, however, whereas this split will formally break apart the businesses. Liberty Media now has a market capitalization of about $12 billion, and the stand-alone Starz will likely be valued at more than $2 billion, based on a multiple of five times cash flow, estimates Maxim Group analyst John Tinker.

The assets left in Liberty Media after the Starz split will be primarily investments, most prominently Liberty's $6 billion-plus stake in Sirius XM Radio Inc. Liberty also has a 26% stake in concert and ticket company Live Nation Entertainment Inc. worth more than $400 million and a smaller stake in Barnes & Noble Inc. It also owns the Atlanta Braves baseball team. The split comes amid Liberty's ongoing effort to exercise control over Sirius, including spending several hundred million dollars to increase its stake to the current effective 46% level. Liberty Chief Executive Greg Maffei said the spinoff would "create significant liquidity at Liberty Media, which preserves our options with respect to Sirius XM and Live Nation."

Some analysts speculated that Liberty's split could pave the way for a deal with Sirius. Mr. Tinker, for instance, suggested that Sirius could acquire Liberty Media, allowing the combined company to reduce future tax liabilities by taking advantage of several billion dollars of earlier losses at Sirius. In an interview, Mr. Maffei wouldn't rule out such a transaction, but said Liberty hadn't decided how to proceed. Mr. Maffei also said the split doesn't "impact our strategy with Sirius." He said Liberty wants to get some of that money it has spent boosting its stake in Sirius, arguing that Sirius should be borrowing money to buy back shares or pay dividends. Mr. Maffei told analysts the company hasn't yet heard from the Federal Communications Commission on its application for permission to exercise effective control of Sirius, an application Sirius has opposed.

The growth of online video options such as Netflix have dimmed the prospects for premium-TV channels, which mainly feature recently released movies. This shift is a bigger threat for Starz, which was late in developing original programming. Rivals HBO and Showtime for years have invested heavily in original series, such as "The Sopranos" and "Boardwalk Empire" on HBO and "Nurse Jackie" on Showtime. Now, overseen by former HBO chief Chris Albrecht, Starz is making a big effort on original shows, such as "Spartacus."

In a statement on Wednesday, Mr. Albrecht said being made independent "is the first step to unlocking the real potential growth opportunities for our businesses." As part of the spinoff, Starz will assume around $1.5 billion in debt. Mr. Maffei said Starz would be "well but conservatively capitalized" with a debt equal to 2.5 times earnings before interest, taxes, depreciation, and amoritization or less. As for the new Liberty, it will get a cash dividend from Starz as part of the split. Liberty would keep substantially all of the $1.8 billion currently on the balance sheet and possibly even more through borrowings on a credit revolver, he said. Wall Street Journal