TPG Makes Bet on High-Speed Broadband

The private-equity firm will pay $2.25 billion for midsize cable companies RCN and Grande, which specialize in high-speed internet service.
Matthew HellerAugust 15, 2016

Private-equity firm TPG said Monday it had agreed to acquire two midsize cable companies for $2.25 billion in a bet on the future of high-speed broadband infrastracture.

RCN Telecom Services provides cable, phone and internet service on the East Coast and in Chicago, while Grande Communications operates in Texas. TPG said it will combine the two companies to create “a top ten U.S. cable company and a regional market-leading provider of next-generation, high-speed data to residential and business customers.”

“High-speed data has become, and will remain, the essential connection for both consumers and businesses,” David Trujillo, a partner at TPG, said in a news release. “Both RCN and Grande are proven leaders in providing fast, affordable, and reliable data services.”

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TPG will pay $1.6 billion for RCN and $650 million for Grande as part of an agreement with their current owner, PE firm Abry Partners. Google Capital, Alphabet Inc. ’s growth-equity investment fund, is taking a minority stake in the cable companies.

As The Wall Street Journal reports, demand for broadband internet service is growing, helping spark a wave of consolidation among companies seeking to better position themselves to capture the growth. Recent deals have included AT&T’s purchase of DirecTV; Charter Communications’ acquisitions of Time Warner Cable and Bright House Networks; and Altice’s purchase of Cablevision Systems.

TPG’s investment portfolio includes CAA, Spotify, Cirque du Soleil, STX Entertainment, Univision Communications, and online education platform “The firm has sought investments tied to changing consumer behavior involving online media and other digital content,” the WSJ noted.

Abry acquired Grande and RCN in 2009 and 2010, respectively, and the two companies have shared management and other resources. According to Multichannel News, Grande has recently concentrated on its high-speed internet business, offering 1-Gigabit service in some of its markets.

“There is an unprecedented amount of diverse, creative content being produced that is extremely bandwidth intensive,” Trujillo said. “Consumers are craving access to that content through various internet-connected devices in the home all at once.”

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