BC Partners and Canada Pension Plan Investment Board have announced plans to sell a 70 percent stake in US cable operator Suddenlink.
The sale comes from BC European Capital IX, (BCEC IX) a €6.7 billion ($7.45bn; £4.79bn) 2012-vintage fund.
The signed agreement, which has been made alongside management and other co-investors, will see multinational cable and telecommunications company Altice acquire the 70 percent stake in Cequel Communications Holdings together with its subsidiary, Suddenlink.
The transaction, which remains subject to regulatory approvals as well as Committee on Foreign Investment in the United States (CFIUS) approval, is expected to complete towards the end of 2015. It implies an enterprise value for Suddenlink of around $9.1 billion.
CPPIB and BCEC IX will continue to hold respective 12 percent stakes with the remainder held by management and fellow co-investors.
Once completed, the transaction will see BC Partners having generated proceeds of over €2.4 billion for its investors over the past 12 months according to an industry source.
BCEC IX and CPIBB acquired Suddenlink in 2012 and it was the third acquisition for BC Partners' ninth fund. Once the sale goes through, BCEC IX and CPPIB are each expected to receive around $960 million and a vendor note of about $200 million.
BC Partners IX held its final close on €6.7 billion in February 2012. The fund currently holds a total of 12 portfolio companies.
BC Partners co-chairman and managing partner Raymond Svider told Private Equity International that he expected to retain the remaining stake for potentially another four or five years, and to work closely with Altice to build further value for the business.
He told Private Equity International: “We are only two and a half years into the Suddenlink deal and have already returned a nice multiple to our LPs. We view this as an investment we can continue to hold for four or five years because we can still build value but we have plenty of time and there is no defined time horizon.”
“We have a very well defined exit mechanism with Altice and they have the synergies and ambition to further build out the group in the US. They have managed to do that very successfully so far.”
A source familiar with the situation indicated that the proposed sale of the 70 percent stake in the business would produce an implied return on the initial investment of around 2.3x in euros, while the group was optimistic of further upside from the remaining stake.
St Louis, Missouri-based Suddenlink is currently the seventh largest cable system operator in the U.S. and the leading television and internet service provider in its markets. It currently has 1.45 million residential and commercial customers.
Svider added: “We continue to invest to grow the business. The key to success in this sector is having a very high quality network and we have invested in that. Cable is subscription-based so we cannot grow that by up to 20 percent a year.”
“We have also meaningfully enhanced our customer offers and have done a lot of work on improving operations and supporting the management.”
Mark Jenkins, senior managing director and global head of private investments, CPPIB commented: “This transaction is an excellent opportunity to realise a portion of the embedded value of CPPIB's original investment in Suddenlink. At the same time we are retaining a stake in the company which will allow CPPIB to continue supporting Suddenlink through the future growth in its business.”
Latham Watkins acted as legal advisors to BC Partners and CPPIB. LionTree Advisors acted as financial advisor to Suddenlink on the transaction.