TPG to Acquire RCN, Grande Communications for $2.25B in Latest Cable Deal

Plugging in Cable - H 2015

Plugging in Cable - H 2015

Google Capital will reportedly take a minority stake in what TPG says will be "a top 10 U.S. cable company."

Private equity fund TPG Capital said Monday that it has struck agreements to acquire regional cable and broadband providers RCN Telecom Services and Grande Communications Networks from private equity firm ABRY Partners for $1.6 billion and $650 million, respectively.

Google Capital, Alphabet Inc.’s investment fund, will take a minority stake in the combined business, the Wall Street Journal reported. Its Google Fiber has been building high-speed broadband networks.

Grande is known for providing services in Texas, while RCN has focused on the East Coast. Together, the companies serve such markets as Austin, Boston, Chicago, Dallas, New York, Pennsylvania, San Antonio and Washington, D.C.

TPG said it will combine the two companies in the $2.25 billion transaction "to create a top 10 U.S. cable company and a regional market-leading provider of next-generation, high-speed data to residential and business customers." The deal is expected to close in the first quarter of 2017 and is subject to closing conditions, including regulatory approvals.

TPG said it was partnering with Patriot Media, the management team headed by Steve Simmons and Jim Holanda that currently manages both RCN and Grande. It has managed RCN since 2010 and Grande since 2013.

It is the latest cable deal as the industry continues to consolidate. Charter Communications recently closed its acquisition of Time Warner Cable and Bright House Networks, Europe's Altice has acquired Cablevision Systems after buying a 70 percent stake in Suddenlink Communications and telecom giant AT&T previously bought satellite TV powerhouse DirecTV.

“The way that content is distributed and consumed has evolved significantly in ways that create an overwhelming demand for affordable, high-speed cable networks. There is an unprecedented amount of diverse, creative content being produced that is extremely bandwidth intensive,” said David Trujillo, partner at TPG. “Consumers are craving access to that content through various internet-connected devices in the home all at once. This places never-before-seen demands on the underlying infrastructure. High-speed data has become, and will remain, the essential connection for both consumers and businesses. Both RCN and Grande are proven leaders in providing fast, affordable, and reliable data services."

The company said that the combined firm "will challenge incumbent telco and cable operators by focusing on providing high-quality and more reliable communications services along with better value and customer service than incumbent competitors." It added: "By providing access to great high-speed broadband connectivity, the new company will be at the forefront of high-speed data disruption."

TPG has partnered with the likes of CAA, Cirque du Soleil, Spotify, STX, Univision and others. Its investments also include Airbnb, Ipsy, RentPath and Uber.