US cable company Time Warner Cable has agreed a $600 million takeover of DukeNet Communications, which operates a fiber-optic network across various Southeastern states.
DukeNet (Charlotte, NC, USA) is currently 50% owned by Duke Energy (Charlotte, NC, USA), the country’s largest electric power holding company, with the other 50% held by investment firm Alinda Capital (Greenwich, CT, USA).
The companies expect the transaction to close in the first quarter of 2014, subject to normal regulatory approvals.
“Business services is a key growth area for Time Warner Cable [New York City, NY, USA] and this acquisition will greatly enhance our already growing fiber network to better serve customers, particularly those in key markets in the Carolinas,” said Phil Meeks, Time Warner Cable’s executive vice president. “This acquisition will help us expand our fiber footprint at a price that is consistent with our disciplined approach to M&A, accounting for expected synergies and tax benefits.”
Duke Energy has welcomed the deal for allowing it to exit what it describes as a “non-core business” on attractive terms.
“We believe DukeNet is well positioned to continue its record of strong growth,” added Chris Beale, Alinda’s managing partner.
The move comes with Time Warner Cable under pressure at its television business from rising programming expenses and a decline in consumer interest, with customers looking to cut back in the tough economic conditions.
It is now focusing more resources on its broadband and network activities, which typically generate higher profit margins.
For the three months ending June, revenue from residential video services fell by 4.4%, to $2.67 billion, compared with the same period of 2012, while sales from high-speed residential data services rose by 12.5%, to $1.42 billion, over the same period.
Business services also showed a marked improvement over the prior-year period, with revenues up by 21.8%, to $565 million.