Time Warner Cable to Acquire Insight for $3 Billion

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In its biggest deal since its separation from Time Warner, the number two cable operator in the U.S. will acquire more than 750,000 customers in Indiana, Kentucky and Ohio.

NEW YORK - Time Warner Cable, the second-largest U.S. cable operator, said Monday it has agreed to acquire small cable firm Insight Communications for $3 billion in cash.

The deal with Insight’s current private equity owners led by Carlyle Group is the company’s largest since its separation from Time Warner.

It will add more than 750,000 customers in Indiana, Kentucky and Ohio to TW Cable.  The company serves approximately 537,000 high-speed data subscribers, 679,000 video subscribers and 297,000 voice subscribers, has invested in substantial infrastructure improvements. 

Insight has been on the block and was originally believed to be looking for a $4 billion deal. 

“We believe in our business and its long-term prospects and have long thought that Insight’s well-run, technologically advanced systems would fit well with our Midwest operations,” said Glenn Britt, Chairman and CEO of Time Warner Cable. “With the deal announced today, we are able to acquire those systems at an attractive price that is consistent with both our disciplined approach to M&A and our capital allocation strategy,”

“Taking into account Insight’s recent performance, $300 million in NOL value, the anticipated net cost synergies and lower capital intensity, this acquisition presents an attractive opportunity to enhance TWC shareholder value,” said Irene Esteves, CFO of Time Warner Cable. “With these benefits, the purchase price multiple is favorable to current TWC and peer average trading multiples.”

She vowed to continue to return excess cash to shareholders as the company has done via dividends and stock buybacks.

Time Warner Cable said it believes that, after incurring onetime costs and capital expenditures, it will create annual cost efficiencies of approximately $100 million through programming expense savings and other cost reductions. The company expects to realize the bulk of the savings within two years of closing.

Wall Street reactions to the deal were neutral to positive with TW Cable's stock down less than 1 percent as of 10am ET.

"The market may view this purchase negatively as TW Cable has been a ''capital return'' story," said Wells Fargo analyst Marci Ryvicker. "However, TWC has recently been ''punished'' for its ''lack of investment.'' Insight is one way for TWC to improve operations and show growth, which has lagged its peers."

And Credit Suisse's Stefan Anninger said in a report: "Our initial view is that the deal is neutral to modestly positive - not cheap, but not terribky expensive either."

Email: Georg.Szalai@thr.com

Twitter: @georgszalai