Subsequent to quarter end, Knology executed a definitive agreement to acquire the assets of Sunflower Broadband ("Sunflower"), a provider of video, voice and data services to residential and business customers in Douglas County and Lawrence, Kansas for $165 million cash. The transaction is expected to close during the fourth quarter of 2010, subject to certain closing conditions, including regulatory approvals.
Sunflower is expected to generate approximately $51 million in revenues and $22 million in EBITDA, pre-synergies, for calendar year 2010. Synergies are expected to be approximately $5 million. The contemplated transaction is structured as an asset purchase and provides Knology with a valuable step-up in the tax basis of the assets acquired.
Knology expects to fund the proposed transaction by using a portion of its cash on hand and by accessing the capital markets in a manner which will allow it to manage the leverage profile of the business, while maintaining the flexibility to continue to grow the business with a disciplined approach.
Highlights of the Sunflower transaction include:
-- Acquisition of a very well managed business with solid operational and financial metrics
-- Maintains Knology's strategic niche, operating in secondary and tertiary markets with favorable demographics and positive economic growth characteristics
-- Consistent culture and value system with focus on customers and employees
-- Similar hybrid fiber/coax network architecture
-- Incumbent cable operator, adding approximately 54,000 homes passed to Knology's existing footprint and approximately 105,000 RGU's to Knology's operations
-- Geography offers attractive edge-out possibilities, tack-on acquisition and larger acquisition opportunities bridging Knology's southeast and upper Midwest footprints
SunTrust Robinson Humphrey is acting as financial advisor to Knology and RBC Daniels is acting as financial advisor to Sunflower Broadband. Credit Suisse and SunTrust Robinson Humphrey have fully committed to provide the required debt capital for the contemplated acquisition by Knology of Sunflower Broadband.