Morgan Stanley emerges as suitor in potential WOW! sale

Regional cable operator WideOpenWest (WOW!) is apparently in “exclusive” discussions to sell its business to Morgan Stanley Infrastructure Partners, though it’s possible the deal could still fall through, Bloomberg reported.

The news follows a report from Bloomberg last month that WOW! was considering a sale of its business. At the time, analysts at KeyBanc suggested private equity firms could be among prospective buyers, though did not name Morgan Stanley among them. However, the firm has a history of investing in the infrastructure sector.

It currently holds a 49.9% stake in U.S. enterprise fiber provider Lightpath. Its portfolio also includes Portuguese wholesale fiber provider FastFiber and German cable company Tele Columbus AG.

Bloomberg did not provide a potential sale price for the company. But Seeking Alpha reported Truist Securities analyst Greg Miller noted WOW! could fetch as much as $30 per share based on the price it secured for its assets in other recent sales. Back in April, Keybanc analysts predicted the sale price could range anywhere from $22 per share on the low end to $37 per share on the high end. As of Monday morning, WOW!’s shares were trading at just under $21 each.

"The average Cable M&A multiples we have seen have been in the 8-12x EBITDA range," KeyBanc's team noted last month. Given WOW! recently sold assets at a value of 11x EBITDA, "it's likely it could target a similar level" in future deals, they concluded.

WOW! inked a pair of deals last June to sell its holdings in five markets for a total of $1.8 billion. Operator CEO Teresa Elder noted on WOW!’s Q1 2022 earnings call it used the proceeds from the sale to slash its debt and leverage ratio. It ended the period with $752.7 million in debt and a leverage ratio of 2.7x.

The operator is currently working on a massive expansion of its fiber footprint and recently doubled its targeted number of passings to 400,000 by 2027. Around 180,000 of these will be spread across three greenfield markets announced by the company, which include Seminole and Orange County in Florida and Greenville County in South Carolina.