Expected higher offer – 50%+ Upside
This pitch was shared by Idea Hive – a great substack worth following and it’s free so far.
I believe WOW is one of the most intriguing special situation plays on the market right now. And I think it is very timely given yesterday’s sell-off. The setup is just packed with compelling dynamics:
- a low-balled offer at $4.80/share from well-informed, deep-pocketed buyer group that includes the major shareholder (39% stake);
- opportunistic timing with WOW sitting on the cusp of earnings inflection;
- two activist investors pushing for a materially higher buyout price;
- multiple valuation angles showing clear support for a higher bid;
- well protected downside in case an improved bid fails to materialize.
As 4 months have already passed since the announcement of the non-binding proposal, an improved offer could be coming shortly.
But first, let’s address the elephant in the room – yesterday’s sell-off. The stock had been trading at a solid 20% premium to the takeover bid for weeks, but yesterday, the share price suddenly dropped to $5.06/share, closing just above the offer price.
The sell-off was pretty odd. The price stayed flat in the morning, and then started dropping around noon, even though there were no news or updates from WOW or the buyer. What’s even stranger is that WOW’s options trading, usually very illiquid for both puts and calls, spiked dramatically yesterday. Here’s the 1-month chart of WOW’s Jan ’25 $5 calls. Trading pattern for put options is pretty similar.
I’m not entirely sure what to make of this, but I think this materially spike in option trading has caused or is related to the 10% drop in WOW share price. Or this was just a case of random market volatility – maybe a large holder sold off some shares causing investors to panic, then driving to speculations of the deal falling apart and leading to a snowball effect. I have not seen anything indicating that the bid is of the table or that the buyers are looking for a way out. With Jan’25 calls now at $0.60/share, the options market is still signaling an improved bid at a significant premium. The setup remains very attractive, and investors can now jump in at a discount. This could be a timely opportunity to load up on this bet.
And now, let’s get to the bones of this case.
WideOpenWest is a $465m market cap cable and fiber broadband provider operating across six states in the U.S. Midwest and Southeast regions. The company provides internet, TV, and phone services via its: 1) legacy hybrid fiber-coaxial (HFC); and 2) fiber-to-the-home (FTTH) networks. WOW operates as a cable/fiber overbuilder, meaning it constructs and operates infrastructure in areas with incumbent cable providers.
In May, WOW received a takeover bid at $4.80/share from a buyer consortium comprising Crestview Partners (which holds a 39% stake) and DBRG. In response, WOW has formed a special committee of independent directors to evaluate the bid.
The transaction is highly unlikely to proceed under the current terms. LB Partners, the largest minority shareholder with an 8% stake, and Andrew Walker (here and here) have both opposed the offer, arguing that it is opportunistic and significantly undervalues the company. With WOW’s stock and options consistently trading at a big premium since the offer, it’s clear the investors are waiting for a big price bump. I believe that a price at least in high teens would be needed to get the special committee and, especially, shareholders on board.
The offer seems very cheap
Crestview’s bid values WOW at 5x TTM EBITDA. As illustrated in the chart below, this multiple is at the low end of the industry transaction range of 5x-10x. It should be noted that these transactions primarily involved lower-quality copper/DSL assets compared to WOW’s HFC/fiber cable infrastructure.
One of the currently pending deals is takeover of CNSL (copper/fiber telecommunications provider) by its major shareholder. The offer came at a 70% premium and values the target at 9.6x TTM EBITDA. Aside from the significantly higher multiple, this deal and CNSL are very interesting for WOW’s case due to a couple of reasons:
- CNSL has been burdened by a significantly higher debt load (compared to WOW) amid ongoing capital expenditures for its fiber expansion program.
- Large part of CNSL’s portfolio is outdated/declining DSL/copper assets, in contrast to WOW’s generally stable and cash-flow-generative HFC business.
Another example is the acquisition of FYBR by Verizon, announced just last week. FYBR is also not a perfect comparison to WOW, as a significant portion of its earnings also comes from DSL assets. However, Verizon valued the company at 8.4x 2025 EBITDA.
Another useful reference point is WOW’s fiber asset sales back in June 2021 and November 2021 done at 11x EBITDA. You might be thinking, “The industry’s backdrop and multiples have worsened since 2021, so those numbers might not be relevant anymore.” I’d agree – it’s highly unlikely WOW could command a double-digit multiple in today’s market. However, it’s worth noting that at the time of those transactions, WOW indicated that the divested assets were of lower quality than the remaining portfolio, mainly due to their lower penetration rates. Given this, I’d argue the gap between the current offer and WOW’s previous divestitures is still way too wide.
Cable peers – CHTR, ATUS, CMCSA, and CABO (see the table below) are currently trading below the 6-7x EV/EBITDA. WOW might deserve a slight discount compared to its peers because it’s an “overbuilder.” This means WOW operates in areas where there are already established internet providers, so to attract customers, it needs to offer better deals – either lower prices or faster speeds. But the current discount feels way too big. As LB Partners pointed out, back when WOW sold assets in June 2021, CHTR was trading at 11.3x EBITDA – just 0.3x higher than WOW’s divestiture multiple.
Looking at this from another angle, Crestview’s bid pegs WOW at $680 per home passed (both HFC and FTTH). This is substantially below valuations of comparable transactions and replacement value of the assets. CNSL was acquired at around $2,500/passing and is close to the low end of WOW’s own network build-out costs. WOW’s management has highlighted that the company has been spending c. $1,050/passing in its greenfield investments (both HFC and fiber), while the cost of edge-outs has ranged from $650 to $750 per passing. For quick background, greenfield investments refer to building new infrastructure from scratch, while edge-outs refer to expanding an existing network into adjacent areas. It’s important to note that these edge-out and greenfield cost estimates provided by WOW’s management do not include the full costs of connecting the end customer’s home to the network. So, I think it is fair to conclude that the current offer values WOW below its replacement cost.
The timing is highly opportunistic
The bid came just days before Q1 2024 earnings, which I’d consider a potential inflection point for the business. To understand why, let’s quickly recap the challenges the company has been facing recently:
- Last year, WOW’s core business took a hit due to poorly executed price increases. This, coupled with intensifying competition from fixed wireless operators, led to a significant decline in subscribers. In Q3 2023, WOW reported a sharp drop in its total broadband customer base – approximately 4,000 vs. about 500,000 total subscribers. Management then warned that Q4 losses would triple those of Q3, spooking the market and nearly halving the stock price after the Q3 earnings release. The stock did not recover until the recent takeover bid.
- In recent years, WOW has invested heavily in its fiber build-out, spending around $180m (over $2/share) since the program kicked off in 2022. This expansion has temporarily increased net debt and resulted in negative cash flows, which is typical, as fiber assets take several years to fully mature and generate returns.
However, it seems that these headwinds are now likely behind the company and earnings are on the brink of an inflection:
- WOW’s management has tackled the legacy business issues by rolling out updated pricing plans in February. These simpler plans seem to have boosted customer retention. As the chart below shows, subscriber numbers stabilized in Q1 and Q2. The slight dip in Q2 was mostly due to the ending of the Affordable Connectivity Program (ACP). On the Q2 call, management also mentioned they’re seeing a “softening” in competition from fixed wireless, which is a good sign moving forward.
- As for the fiber build-out, most of WOW’s near-term capital expenditures are already behind them. They spent $43m in Q1 and $10m in Q2 on greenfield capex, compared to their full-year guidance of $60m for 2024. With capex expected to drop and fiber assets starting to mature, WOW is well-positioned to generate solid cash flows in H2 2024 and beyond.
So, while Crestview’s bid came at a sizable premium to pre-announcement levels, I think it’s fair to suggest that WOW’s stock would have risen substantially since the Q1 results without the takeover bid. This implies that the offer might effectively be coming at a minimal or even no premium.
As further evidence that the pre-announcement price might not be a relevant reference point, CHTR is up 31% (currently 23%) since Crestview’s bid announcement. As argued by Andrew Walker in this open letter, peer performance has been driven by factors applicable to WOW (e.g., slowing competitive pressure from fixed wireless players and a manageable ACP roll-off).
What is the potential upside?
One way to estimate a higher offer price is by factoring in the value of WOW’s newly built fiber assets, which haven’t yet significantly contributed to the company’s value, on top of the current offer. If we conservatively value these assets at cost and keep the rest of the business at the current offer price, that would point to a target of around $7/share – almost 40% higher than the current price. However, if we assume the improved bid values WOW’s core business at a slightly better 5.6x EBITDA (still one turn below CHTR’s valuation), and add in the fiber assets at cost, the potential bid jumps to $8.8/share – over 70% above the current stock price.
Potential risks
If the special committee were to somehow approve to the current bid at $4.8/share, the downside to the offer levels would be just 5% (though the stock might trade at a slight spread to the bid price).
The biggest risk here is a “no deal” scenario. With the large gap between the current bid and WOW’s intrinsic value, there’s a chance the company, the special committee, and the buyer consortium might not agree on a final takeover price. Unlike the CNSL situation, WOW has already completed most of its fiber build-out, so if the eventual offer bump isn’t significant, the company could easily choose to stay independent rather than accept a lowball offer.
However, I think this risk is low. The buyer group comprises highly-reputable and well-informed players. Crestview is a large private equity firm ($10bn in AUM) that has previously made investments in the cable space, including in CHTR (stake acquired in 2009). DigitalBridge is among the largest digital infrastructure-focused private equity firms ($80bn in AUM), which focuses on cell towers, data centers, and fiber networks. This, coupled with Crestview’s multi-year involvement in WOW (stake acquired in 2015), indicates that the consortium is highly aware of WOW’s underlying value and is thus unlikely to walk away when the gap to intrinsic value is just so wide. As an indication of this, during another recent investor conference, DBRG’s CEO indirectly hinted at the cheapness of WOW in the context of fiber industry multiples:
I think in the last panel you heard this disconnect between private M&A multiples and public M&A multiples. There’s a big disconnect there, particularly like in fiber, where you saw private trade, you know, last week that was done at KKR paying like 22x, 24x for a cable business essentially, and a good cable business, mind you. But, and then in the same token, you see some of these public equities in fiber trading for 4 times. That’s a pretty big value disconnect. 4x to 22x or 24x—that’s about as big of a disconnect as I’ve seen.
Even in the unlikely scenario where the current bidders back out, there is a solid chance that WOW might launch a full-on sale process to look for other potential suitors. One interesting detail is that Crestview’s 13D filing, which included the non-binding offer, didn’t say that the buyer would oppose any alternative deal – a statement that’s typically included in such situations. Crestview previously initiated a sale process for WOW in 2022, although it ended up with no results. These factors could indicate that Crestview might be a willing seller.
How would you reply to the bearish notes in this hit piece that came out this week?
https://poorhomelessman.substack.com/p/calumet-inc-clmt-is-trash
side note – i’m long af, mean to be constructive
Not quite sure what to make of it.
There is a lively back and forth discussion on X between the author of the negative piece and a long guy. Seems like we might need another quarter to get a better picture of true EBITDA in the current margin environment. Also more time for DOE to potentially come through.
I am long.
Press release came out on 9/11/24 regarding a shareholder rights law firm said to be investigating WOW over fiduciary duty.
https://www.fox21news.com/business/press-releases/accesswire/916004/wideopenwest-inc-may-have-violated-securities-laws-and-shareholders-with-losses-are-urged-to-contact-the-schall-law-firm/
These are practically ubiquitous and usually have no impact.
Don’t disagree – possibly the press release was the cause of the dip on 9/11/24. Noted the stock rebounded back from 9/11 lows about 10% on 9/12.
Is WOW’s much lower penetration rate (26%) vs peers (46% on average) a big negative for its valuation?
Thanks for the question. Lower penetration rates are admittedly a negative for WOW’s valuation. As discussed in the write-up, as an overbuilder, WOW has to offer lower prices and/or faster speeds to attract customers from already established cable service providers. However, there are several points I would highlight:
– Despite having lower penetration rates compared to incumbents, WOW boasts similar EBITDA margins (e.g., 42% TTM EBITDA margins compared to 41% for CHTR and 39% for ATUS). Why is that? One reason is that as an overbuilder, WOW has lower exposure to revenues from the declining, lower-margin, and capital-intensive legacy video/TV business (as opposed to high-margin broadband services). I would refer you to WOW’s March 2023 conference call (see the link below), where the CEO highlighted that broadband boasts 97% gross margins, while video’s gross margins were only 17%, with “a lot of opex in the business, especially in the area of customer service.” So it could be argued that WOW’s status as an overbuilder allows the company to focus on offering the highest-margin broadband services — this helps offset some of the negative impact of having to offer discounts or lower prices and/or faster speeds to customers.
– Another aspect is that the reported penetration rates primarily refer to companies’ HFC cable networks. So far, the penetration rates of WOW’s fiber edge-outs completed in 2022–2024 stood at 23%–39%, while greenfield build-out penetration is currently at 15% (see the link below, p. 5). While I have not come across such data from closest comp CHTR, ATUS’s most recently reported fiber network penetration stood at 15%. While WOW and ATUS’ fiber networks are not perfectly comparable, given they largely focus on different markets, this directionally illustrates that WOW’s penetration rate in the fiber networks might be similar to incumbents.
So, overall, I would conclude that WOW deserves a slight discount to its publicly listed cable peers, with the question being how large the discount should be. While I am unable to pinpoint a specific valuation discrepancy, I think LB Partners makes a good point that back in 2021, CHTR, traded at a tiny 0.3x premium to the 11x multiple at which WOW divested several of its lower-quality assets. Nonetheless, even conservatively applying a 1-turn discount to the current TTM EBITDA multiples (6.5x for CHTR vs. 5.1x for WOW) would imply a 20% upside. Note that this ascribes no value to the fiber buildout, where the vast majority of capex has already been spent.
https://www.bamsec.com/transcripts/45f397ea-5a4a-49f2-a288-ac4b9746ea00
https://s201.q4cdn.com/487822230/files/doc_financials/2024/q2/WOW_Q2-2024-Investor-Presentation.pdf
Thank you for the idea. Do we know why the sale failed in 2022 and who would be interested to bid above the current bid now? thanks
A lot of sales processes were pulled in 2022, due to market volatility caused by unexpected inflation/interest rate hikes/Ukrainian war etc. It was likely not company specific.
Any updates / revised thinking on this? Stock has been trending downward the last month or so
My view on the situation remains unchanged: I continue to expect both sides to come to terms on a significant price increase, likely in the coming weeks or months. The recent downward drift in the share price may have been partially driven by the hurricanes that impacted Florida, where 22% of WOW’s homes passed are located, and 19% of its total network miles are situated. However, while the hurricanes did cause outages, they do not appear to have resulted in significant damage to WOW’s infrastructure, as evidenced by the company’s swift restoration of service to customers. I would refer you to a Reddit post (see link below) that highlights WOW had already restored network connection to 47% of customers in St. Petersburg, FL, as of Monday. So, I believe the hurricanes will not affect the buyer consortium’s view of WOW’s fair value or the likelihood of a substantial price increase.
https://www.reddit.com/r/StPetersburgFL/comments/1g3uo2e/wow_internet/
WOW has released Q3 earnings – no major updates on the offer, special committee continues to review it. Under management’s 2024 guidance, the stock trades just below 5x adj. EBITDA – The offer still looks too cheap.
The most important takeaway from the earnings release was that the takeover process remains ongoing. During the earnings release and conference call, management highlighted that the special committee continues to review the takeover bid from Crestview and DigitalBridge and that “nothing has changed” with regard to the go-private process. Considering that WOW’s recent announcement of a new $200 million loan might have sparked some concerns about the buyout thesis, this is clearly a positive, indicating that the takeover by the major shareholder is still very much on the table.
On the operational performance front, results during the quarter were mostly in line with management’s expectations and previous trends. FY24 guidance is broadly in line with the performance seen year-to-date. While the company expects a sizable decline in its subscriber base, the majority of this decline is expected to be driven by one-off events, including the ACP roll-off and the recent hurricanes.
So, given that 1) the takeover process is ongoing and 2) there were no major updates on the operational performance front that could negatively impact the buyer’s perception of WOW’s value, I continue to expect a significant price bump here. Given that the time elapsed since the non-binding offer (6 months) aligns with the timeline seen in a similar takeover of CNSL, I’d expect a definitive agreement to be announced shortly.
Where could the improved price land? Valuing WOW’s existing cash-generating assets at the current 5x TTM/2024E EBITDA multiple and simply adding the costs spent on yet-to-be-cash-generative fiber assets, you would arrive at a price target of c. $7/share, or a 25%+ upside.
WOW is now trading at a 5% discount to the $4.80/share offer.
As noted by Snowball, WOW’s share price has continued to drift lower recently, and the spread to the $4.80/share offer is now at 6%. The recent stock price decline (8% over the last month) is broadly in line with the broader cable industry, with WOW’s peers CHTR, CABO, and CMCSA down 7%, 9%, and 6%, respectively, over the same period. Another reason for the share price weakness might be increasing market concerns about the prolonged time since the non-binding offer (8 months have passed). However, given that WOW’s management reiterated in November that the sale process is ongoing, and considering Crestview and DigitalBridge’s solid reputations, I do not believe the extended timeline indicates significant negotiation difficulties. So, I continue to believe WOW presents an attractive arb setup.
What do you think is holding back the negotiation? Buyer unwilling to raise the offer price?
I think one aspect that might explain the prolonged timeline could have been some uncertainty surrounding the debt refinancing required to fund the fiber buildout program. This uncertainty might have delayed the negotiations and assessment of WOW’s fair value, given that a significant chunk of the company’s value is in its fiber assets. However, with the refinancing announcement several months ago, the path is clear for the company to continue with the fiber buildout program while the takeover is pending/until it is completed.
As for the buyer’s unwillingness to raise the price, I do not think this is a likely explanation, considering the wide gap between WOW’s current valuation and intrinsic value. Considering the DBRG CEO’s language quoted in the pitch, I think it’s safe to say that the buyer consortium sees plenty of headroom for a price bump while keeping a significant portion of the value for themselves. So, I continue to expect both sides to come to a takeover agreement at a significant premium to the current stock price shortly.
Do you have any speculation as to what you think a higher offer would land at?
I think it is reasonable to assume that the buyer consortium would increase the bid by the value of the fiber assets, as these assets have not yet significantly contributed to the company’s value or generated meaningful revenue/EBITDA. Conservatively valuing the fiber assets at cost ($2.2/share) and leaving the remaining business at the offer valuation implies a price target of c. $7/share. I will note that this values WOW’s core business at 4.6x TTM EBITDA, a significant discount to its closest peer, CHTR, which trades at 6.5x EBITDA. A slight uplift in the core business valuation multiple to, say, 5x would imply a price target of close to $8/share. While I am uncertain about the likelihood of the buyer consortium paying a higher valuation for the core business, I’d note that back in 2021, CHTR traded at only a 0.3x premium to the 11x multiple at which WOW divested several of its lower-quality assets.
@Idea Hive,
Did those lower quality assets divested by WOW back in 2021 at 11x have significant synergy potential with their buyers (to justify a higher valuation)?
I am wondering why the whole sector has de-rated by so much (e.g., CHTR from 11.3x to 6.5x)? Just because of higher interest rates?
As you mentioned, increases in interest rates have definitely been one of the key factors, considering that most cable companies are highly leveraged. Other factors I would highlight include the changing competitive landscape, particularly the intensifying competition from 1) fixed wireless access (FWA) and 2) fiber-to-the-home (FTTH) providers. Major telecom players, including T-Mobile and Verizon, launched their FWA broadband offerings in 2021 and have subsequently been aggressively scaling these offerings since 2022. See the article linked below for how T-Mobile’s number of FWA customers has grown in recent years. As for FTTH, a number of fiber providers (e.g., CNSL, FYBR) similarly launched aggressive fiber buildout programs between 2020 and 2022. For example, FYBR announced in 2021 its plan to reach 10m locations by 2025, and its fiber passings have grown from sub-4m in 2021 to 7.6m as of Q3 2024.
https://www.nexttv.com/news/t-mobile-fixed-wireless-growth-slows-27-to-406000-customers-in-q2-as-operator-turns-its-attention-to-fiber-fueled-convergence
Idea Hive,
Do you think the market is fully discounting a “no bid” scenario? What do you believe is the downside from here if WOW announces there is no deal?
Tom
I think that, at the current stock price, the market might be pricing in a significant chance that the transaction could fall through. Using the pre-announcement level ($3.79/share) as the deal break price and assuming a potential price bump to $6/share, the implied deal closing probability is c. 25%. Using instead the $4.80/share offer would imply a roughly 50% closing probability. However, I must note that the chances of the transaction moving forward at the same terms are highly unlikely, given how undervaluing the current offer is.
Regarding the share price in a deal break scenario, I would note that the $3.79/share deal break price might be overly conservative, considering that the share prices of several of WOW’s peers, including CHTR and ATUS, are up more than 40% since the non-binding offer was made. While I would not be surprised to see the share price return to pre-announcement levels, I would expect such a move to be temporary. So, I believe the downside is fairly well protected at the current stock price levels.
Noted the CEO sold a few (~600) shares vis her 10b5-1. Don’t think this adds anything or is very relevant to the thesis, but wondering if exec’s usually cancel these if they are in a process ? tks
From the earnings transcript:
“I’d like to reiterate that we do not have any information to share regarding the unsolicited nonbinding acquisition proposal from DigitalBridge and Crestview Partners at this time. And while we will take questions at the end of our remarks, we will not be taking any questions on that topic. ”
—-
“Frank Louthan
Great. I appreciate that you’re not taking the questions on the deal, but can you confirm that both Crestview and DigitalBridge are still engaged with the offer for the acquisition? That’s my first question.
Teresa Elder
Yes, Frank. We don’t have any updates for you beyond what we have said every quarter.”
I think the Q4 earnings call was confirmatory of the buyout thesis. Management highlighted costs associated with “M&A activity” as one of the factors behind unusually high non-recurring expenses over the last several quarters. But more interestingly, it was mentioned that the company has been “examining bids”—plural. See the quote below. Its possible this explains the prolonged timeline since the non-binding offer was made public in May 2024: the company might’ve attracted interest/offers from other parties, which has now led to a full-blown company sale process.
WOW’s share price has jumped nearly 20% over the last week (vs peers up 3-12%), and the stock is currently trading just above the $4.80/share bid. I believe there’s substantial headroom for any suitors to offer $7/share and still make out like bandits. Meanwhile, the potential downside at the current stock price remains well protected. With the investment thesis intact and favorable risk-reward, I continue to like the setup.
The quotes:
“But I just wanted to give you some of the biggies that are in that line item would be things like the Sprint settlement, there would be things like costs associated with the theoretical M&A activity that you keep asking us about.”
“And when examining bids, there — as you would imagine there are legal costs and all other kinds of costs that we incur and they really have nothing to do with the ongoing running of the business.”
“potential acquirers to offer $7/share and still make out like bandits” >$2 spread. Why do you think the market disagrees with you ?
I think the market may be pricing in too high a probability of the transaction falling through, especially given the prolonged timeline. There is certainly a scenario where, given the large gap between the current bid and WOW’s intrinsic value, the special committee and the buyer consortium fail to agree on a final takeover price, and the company chooses to remain independent. While this is definitely a risk, I think the current implied closing probability of 33% (with $7/share as the upside scenario) is too low. Considering the ample headroom for an offer increase and Crestview/DigitalBridge’s reputations and strong interest in acquiring cable assets (e.g., DBRG CEO’s language quoted in the pitch), I would instead peg the probability of a successful price bump at 70%+.
As I was posting that I think WOW will pull back again because…
@given2trade4 on youtube (SWTX originator) mentioned there was a WOW writeup on the day it pumped up to $5 this week.
Legitimate news hit about D-bridge and WOW:
NEW YORK (Reuters) – A group including DigitalBridge and Crestview Partners is attempting to clinch a deal to acquire WideOpenWest, in what would cap a year-long effort to take the broadband and cable services provider private, according to people familiar with the matter.
The deliberations between the bidding group and WideOpenWest have progressed in recent weeks and a deal could come together in the coming weeks, if the talks don’t hit a snag, the sources said, requesting anonymity as the discussions are confidential.
The two sides are yet to agree on all the terms and it’s possible that no deal will be signed, the sources added. The latest offer price could not be learned.
A positive update, further confirming that the buyout discussions are ongoing and potentially nearing the end. While the fact that it has taken over 10 months for the negotiations to “progress” is a bit puzzling, as stated in a previous comment, the most likely explanation seems to be that the company has attracted acquisition interest from other parties. Assuming this is accurate, the recent report suggests that Crestview/DBRG has emerged as the highest bidder. That said, one could speculate that the report was leaked by the buyer consortium/WOW to potentially solicit higher bids from other interested parties.
Does anyone have any thoughts on the amount of money WOW is spending within “Non-recurring professional fees, M&A integration and restructuring expense”? Pre-bid, for FY 2023, that line item was $27.8mm and another 8.6mm in Q1 2024… so let’s say the run-rate is ~$30mm. Since the bid became public last year, the run-rate is now ~$60mm or an incremental $30mm (rough math). That seems like a lot to me, for a company of this size, but I really don’t have a frame of reference. Other than generically knowing the evaluation is still ongoing, wondering if anyone has anything more intelligent to add?
It puzzles me too. Normally, the potential buyers are spending a lot of money in advisory/legal fees, and the target/seller doesn’t start to pay a large amount of fees until preliminary offers are received.
$30m/year in fees seems too high.
Maybe WOW also has been exploring acquiring/divesting assets.
Idea Hive, any update on this? are you still holding? This has been dragging on for a year now. Management simply said “The work of the Special Committee is ongoing” during earnings release on Tuesday.
Anyone has any thoughts on this? spread at 20% now, LOTS of time has passed though. Has anyone seen similar situations take this long?
If the valuation of the company mentioned in the article is right, between 7-8,8$, why is the stock not trading at a small discount to the offer price of 4.8$?
The market 1) distrusts that there will be such a deal and 2) gets it wrong all the time including here.
3) it always takes longer ;-)
The spread has widened to about 32% after a sell off to $3.64.
Starting to feel like the BHIL bk, though with a more legitimate takeout offer.
Your post made me re-analyze WOW, do you see a risk of insolvency? Liquidity is somewhat thin with $28.8 m cash + $131 m revolver availability vs. ~$90 m annual capex run‑rate and $80‑85 m cash interest, but I see no BK on the horizont.
I monitor their IP address usage, prefixes and network announcements and I see no signs of stress there, the number of IPv4 (counting 800,768 addresses for 473,800 customers) and IPv6 addresses/prefixes announced seem to be stable as well as upstreams and downstream customers (which probably do not matter that much as this is mostly an eyeballs network).
RGUs declined YoY ~10%, customers ~5-6% TTM, Video RGUs fell 38 % YoY to <50 k; broadband RGUs down 5 %. ARPU hikes (+7 % YoY). Homes‑passed expansion was +25 k QoQ with ~$11 m of greenfield spend.
I wonder why the impairment‑testing control issue identified in 2024 was still not fixed, but still hope it is a nothing burger; but wouldn't that also be an issue with any take private? Wondering how commited the board really is to the strategic alternatives.
Looking at the crash of CHTR.. maybe John Malone will start a new consolidation using GCI!?
On CHTR earnings, I think the results show secular competitive pressure from fiber and fixed wireless, which has been dragging down CHTR’s and the broader cable industry’s operational performance for some time. That said, CHTR’s internet net add declines are broadly in line with or lower than past quarters, so it’s possible the market overreacted.
Regarding potential solvency issues, I agree the likelihood is low. WOW has sufficient cash and revolver capacity to cover interest expenses in the short term. If liquidity became a real concern, they could simply pause the fiber buildout program and instantly generate sufficient cash flow to at least cover interest payments.
I continue to believe WOW remains cheap from multiple angles, including on a replacement-cost basis. While the takeover process has obviously dragged on for a while now, I’m looking forward to the Q2 earnings for an update and, hopefully, the announcement of a definitive agreement.
I have no particular view and am not involved, but the liquidity, share price action, and long process all seemed reminiscent.
As long as the business continues to struggle though, the offer does not get better if the deal does go through…
Cox was valued at 6.4x in its deal with Charter. It’s a different type of deal but it’s still a recent comp negotiated by a private owner. But this is an all-in multiple and I worry that adding fiber capex on top has the risk of double counting on earnings and failing to impair low-returning investment. Maybe it would be more conservative to add only the very recent fiber capex but then again perhaps the existing declining business doesn’t deserve the 6.4x multiple.
Good job Hive
It’s -6.5% in 11 months or am I missing something?
Congratulations everyone, the spread is very narrow (~$5 vs $5.20 offered) and I have exited my position.. I’m sure that other bidders will now emerge ;-)
This was not a winner by any means, unless you doubled down when the story seemed to change. Thankful for the outcome after the journey though.
The prolonged WOW privatization saga has finally come to an end. I think the outcome is slightly disappointing, as the $5.2/share bid substantially undervalues the company—whether on a relative valuation or replacement cost basis—while also coming at only a tiny premium to the non-binding offer. That said, the bid comes amid broader recent challenges in the cable industry (as indicated by CHTR’s stock price decline post-earnings) and at a substantial premium to recent trading levels. While Crestview has previously hinted it might be open to selling to third parties, considering the long sale process timeline, I think WOW has fielded the best available offer, and thus a higher offer might be out of the cards here. I will be looking forward to reading the merger proxy once it comes out. For now, with the spread at only 4%, I intend to close my position and finally move on.
For those still following, the merger proxy is out. The buyer consortium initially lobbed a $5.50–$6.25/share bid in October before launching a $6.25/share bid in December, which was agreed to by the special committee in February. Subsequently, the consortium reduced the offer to $5.50/share following due diligence findings, which coincided with peak tariff uncertainty. In May, the offer was raised to $5.82/share before eventually being reduced to the announced $5.20/share offer. While there were a number of other interested strategic and financial parties involved, only one party lobbed bids, starting at $5.50–$8/share but later reduced to $4.80/share in February. So, it appears WOW’s special committee accepted the highest available bid.