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Providence Could Fly Solo in Big Deals

2/23/2007 7:00 PM Eastern

Providence Equity Partners finished assembling a new $12 billion fund last week — Providence Equity Partners VI — a move that could mean the private equity giant is getting ready to go after larger deals in the media and communications sector on its own.

One of the largest private equity firms in the country, Providence Equity manages about $21 billion in total equity commitments. Providence Equity Partners VI is the firm’s sixth fund since its inception in 1990.

The fund will be one of the largest specialized funds in the world and is almost three times larger than its last fund — Providence Equity Partners V — which raised about $4.25 billion in 2004.

Providence said it raised the money through corporate, state and sovereign pension funds, university endowments, private foundations, funds of funds, and high net worth individuals.

Providential Deals
Just a few of Providence Equity Partners’ investments in domestic and international media:
Source: Providence Equity
Content
:Metro-Goldwyn-Mayer: Major U.S. independent film studio, owns the world’s largest library of modern films. Providence is MGM’s largest shareholder. Warner Music Group: World’s fourth-largest music label and second-largest music publishing company. Providence Equity, with Edgar Bronfman and a consortium of private investors, acquired control from Time Warner in 2004.
Yankees Entertainment & Sports Network: New York-based regional sports network, carrying games from MLB’s New York Yankees, NBA’s New Jersey Nets and NHL’s New Jersey Devils. Providence is a founding investor in YES.
International Cable and Satellite:
Kabel Deutschland: Germany’s largest cable operator with 10 million subs.
Com Hem: Sweden’s largest cable operator with 1.4 million customers.
Digiturk: Turkey’s largest pay TV service provider with more than 1 million subs to its satellite TV service.
U.S. Cable:
Bresnan Broadband Holdings: Providence is the largest shareholder in Bresnan’s Mountain States Cable Television, which acquired 314,000 subs in Montana, Wyoming, Colorado and Utah in 2003 from Comcast.
Newspapers and TV stations:
Freedom Communications: Privately owned, diversified media company with metro newspaper, community newspaper, and TV broadcasting operations.

IT WAS OVERSUBSCRIBED

“We are gratified by the strong support of our limited partners who enabled us to raise this substantial new fund in only four months,” Providence Equity CEO Jonathan Nelson said in a press release. “We remain focused on delivering superior returns to our investors through our distinctive approach to equity investing.”

According to a person familiar with Providence Equity, the new fund was originally targeted to reach about $8 billion but quickly grew to $12 billion because of strong demand. Even at $12 billion the fund was oversubscribed, the person said.

What Providence will do with all of that financial firepower remains to be seen.

The company has been an aggressive cable investor in the past — it was an early backer of Continental Cablevision, Fanch Communications and others — but recently counts Bresnan Broadband Holdings as its only U.S. cable holding.

Internationally, the story is different. Providence controls the largest cable operator in Europe — Germany’s Kabel Deutschland — and has interests in UPC Sverige and Com Hem in Sweden and in Digiturk, the largest pay TV service provider in Turkey.

Providence also recently opened offices in Hong Kong and New Delhi to take advantage of investment opportunities in those countries.

Providence also has several U.S. content holdings — it was a founding investor in regional sports network Yankees Entertainment & Sports Network, was part of the consortium that bought Metro-Goldwyn-Mayerin 2004 for $4.9 billion and backed Seagram’s heir Edgar Bronfman’s acquisition of Warner Music Group from Time Warner.

Providence also was one of three private equity groups that backed Haim Saban’s $13.7 billion acquisition of Univision Communications last year.

Providence has also been active in the international communications sector: in February it agreed to purchase Australian newspaper and radio station owner APN News & Media, and in October bought a 15% interest in Indian wireless operator Idea Cellular.

BOLSTER BRESNAN?

UBS Securities cable debt and equity analyst Aryeh Bourkoff said that, in the cable TV business, Providence could focus on adding properties to one of its existing investments, Bresnan Broadband Holdings.

“Providence has always been a savvy buyer of cable properties and will likely look for opportunities to bolster its current holdings, which are concentrated in the Bresnan assets,” Bourkoff said. “The problem is there is a scarcity of small systems held for sale.”

But over time, particularly as Time Warner Cable completes the integration of the former Adelphia Communications systems, other smaller properties could come on the block.

Bourkoff also said Charter Communications has been willing in the past to divest smaller, non-strategic operations, and while nothing is imminent, some Charter properties could also hit the market over time.

Bourkoff said that Providence could also focus on international cable or on content companies.

Recently, Hallmark Channel parent Crown Media Holdings was for sale, but cancelled those plans last year when offers came in below its reported $1 billion-plus asking price. Speculation about Cablevision Systems selling its Rainbow Media Holdings programming unit has been rampant for years. Rainbow, which includes AMC, the Independent Film Channel and WE, has been valued at about $3 billion.

“I think Providence will be active in all of media and telecommunications. The key question will be how big they’re willing to go for the next transaction,” Bourkoff said.

Bourkoff added that with $12 billion in its coffers, Providence has few limitations in the deals it could pursue.

“A fund of that magnitude puts them at the table for any media asset that’s held for divestiture, no matter how small or how big,” Bourkoff said.

 

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