matthew-boyle

Cablevision Said to Agree to Buy Bresnan Communications for $1.36 Billion

by on June 13, 2010

By Serena Saitto and Matthew Boyle June 13 (Bloomberg) — Cablevision Systems Corp. , the fifth-largest U.S. cable operator, agreed to buy Bresnan Communications Co. for $1.36 billion, people close to the negotiations said. Cablevision competed against bids from TPG Capital, BC Partners Ltd., Suddenlink Communications and Ascent Media Corp., said one of the people who declined to be identified because the details aren’t public. John Malone , chairman of Liberty Media LLC, owns 30.3 percent of the voting shares of Ascent Media. Bresnan is expected to issue a statement announcing the deal by tomorrow, the person said. Acquiring Bresnan would give Cablevision a bigger slice of the burgeoning market for high-speed Internet services, where revenue is expected to rise to $210 billion globally in 2014 from $164 billion in 2009, according to ABI Research in Oyster Bay, New York. “Bresnan is quite well-run, with well-upgraded systems that have been aggressively rolling out advanced services,” wrote analyst Richard Greenfield of BTIG LLC in New York, in a note to clients on June 9. “The quality of the systems is high and the competitive risks are low.” Cablevision spokeswoman Kim Kerns and Providence spokesman Andrew Cole didn’t respond to a voicemail and e-mail left for them seeking comment. TPG spokesman Owen Blicksilver and BC Partners spokeswoman Martha Kelly both declined to comment. Midwestern Roots Bresnan, based in Purchase, New York, provides broadband- communication services in Montana, Wyoming, Colorado and Utah and is 30 percent-owned by Comcast Corp. Private-equity firm Providence Equity Partners Inc. has hired Credit Suisse Group AG and UBS AG to sell the company for more than $1 billion including debt, two people with knowledge of the matter told Bloomberg News earlier this month. Bresnan Communications was founded in 1984 by William J. Bresnan , who was born in Mankato, Minnesota, according to the company’s website. Bresnan initially operated cable systems both in the Upper Midwest and internationally, before focusing on the Rocky Mountain states, the website said. Bresnan, who repurchased the company in 2003 for $525 million with backing from Providence, died last year. Jeffrey DeMond, a long-time executive who served as chief financial officer and president, has been CEO since last year. Going West The purchase expands the customer base of Cablevision from the New York City region into the western U.S. market, which is attractive because it has no competition from Verizon Communications Inc.’s fiber-optic TV service and lower pay-TV penetration rates than Cablevision’s home market. The move will allow Cablevision to add Bresnan’s 320,000 subscribers to its more than 3 million. The deal will add to, or at least not hurt, Cablevision’s free cash flow, BTIG’s Greenfield wrote. Chief Executive Officer Jim Dolan , whose family controls Cablevision, spun off the company’s Madison Square Garden unit this year to concentrate on the more profitable cable assets. On the company’s May 6 conference call, Gregg Seibert , an executive vice president, said the company’s first priority was to use its free cash flow to invest in and expand the business. Providence is also trying to sell Metro-Goldwyn-Mayer Inc. as the Los Angeles-based film studio, which Providence and other investors took private for $5 billion in 2005, struggles to repay $3.7 billion in debt. TPG Capital, Sony Corp. and Comcast Corp. also participated in that purchase. Cablevision, based in Bethpage, New York, rose 3 cents to $23.40 in New York Stock Exchange composite trading on June 11. The stock has gained 9.8 percent year to date. To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net ; To contact the reporters on this story: Serena Saitto in New York at ssaitto@bloomberg.net .

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Cablevision Said to Agree to Buy Bresnan Communications for $1.36 Billion

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Cablevision Agrees to Purchase Bresnan Communications for $1.36 Billion

by on June 13, 2010

By Matthew Boyle and Serena Saitto June 13 (Bloomberg) — Cablevision Systems Corp. , the fifth-largest U.S. cable operator, is said to be near the purchase of Bresnan Communications Co. for about $1.3 billion, people close to the negotiations said. Bresnan, based in Purchase, New York, provides broadband-communication services in Montana, Wyoming, Colorado and Utah and is 30 percent-owned by Comcast Corp. Private-equity firm Providence Equity Partners Inc. has sought to sell the company for more than $1 billion including debt, two people with knowledge of the matter told Bloomberg News earlier this month. Acquiring Bresnan would give Cablevision a bigger slice of the burgeoning market for high-speed Internet services, where revenue is expected to rise to $210 billion globally in 2014 from $164 billion in 2009, according to ABI Research in Oyster Bay, New York. Cablevision spokeswoman Kim Kerns and Providence spokesman Andrew Cole weren’t immediately available for comment outside of business hours. Cablevision sought Bresnan’s properties because the broadband provider doesn’t compete with phone operators AT&T Inc. and Verizon Communications Inc. in the areas it operates, said David Joyce , an analyst with Miller Tabak & Co. in New York. Cablevision was among a group of bidders that included Suddenlink Communications in St. Louis, Ascent Media Corp. in Englewood, Colorado, and at least one private-equity firm, according to people with knowledge of the matter. John Malone , chairman of Liberty Media LLC, owns 30.3 percent of the voting shares of Ascent Media. Cablevision, based in Bethpage, New York, rose 3 cents to $23.40 in New York Stock Exchange composite trading on June 11. The stock has gained 9.8 percent year to date. To contact the reporter on this story: Matthew Boyle in New York at Mboyle20@bloomberg.net

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Cablevision Agrees to Purchase Bresnan Communications for $1.36 Billion

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THL Partners Sells Michael Foods to Goldman Buyout Fund for $1.7 Billion

May 21, 2010

By Jason Kelly and Matthew Boyle May 21 (Bloomberg) — Private-equity firm Thomas H. Lee Partners LP agreed to sell Michael Foods Inc., a supplier of refrigerated foods, to a fund run by Goldman Sachs Group Inc. for about $1.7 billion. Thomas H. Lee, also known as THL Partners, will continue to own about 20 percent of the company after the deal closes, according to a statement today from Minnetonka, Minnesota-based Michael Foods. Private-equity dealmaking is accelerating as the economy stabilizes and financing becomes available for new transactions. Thomas H. Lee, based in Boston, will make about three times the $290 million it put up to buy Michael Foods in 2003, said a person familiar with the deal who declined to be named because the company is closely held. “Food companies have always been a favorite of private- equity firms because of the strength and stability of their cash generation,” Christopher Growe , a Des Peres, Missouri-based analyst with Stifel Nicolaus & Co., said in an e-mail. “With the credit market wide open today, it would seem like we could see a much more active private-equity market.” $1.05 Billion Purchase Thomas H. Lee agreed to buy Michael Foods for $1.05 billion in 2003 from a group of owners including private-equity firms Vestar Capital Partners and Goldner Hawn Johnson & Morrison Inc. Executives also held part of the food company, which they took private in April 2001 for about $800 million. Doughnut seller Dunkin Brands Inc. and Aramark Corp. are among Thomas H. Lee’s holdings. The firm started in 1974 and has invested in about 100 companies. Michael Foods makes egg products, refrigerated potato edibles, cheese and dairy items. The company reported 2009 sales of $1.54 billion, a 15 percent decline from 2008. As the world’s largest processor of eggs, according to its website, the company gets about two-thirds of sales from related products, such as AllWhites liquid egg whites. Crystal Farms cheese and Simply Potatoes are among its brands. Its net income rose 48 percent in 2009 to $69.5 million, compared with $46.9 million in the year-ago period, the company said on its website in March. James E. Dwyer Jr., Michael’s president and chief executive officer, has pursued a strategy of lowering costs and focusing on higher-margin items such as low- cholesterol and pre-cooked egg products. He joined the company in November from supermarket firm Ahold USA. Advising Michael Foods and THL were BofA Merrill Lynch, according to today’s statement. Weil, Gotshal & Manges LLP was their legal adviser. Law firm Fried, Frank, Harris, Shriver & Jacobson LLP advised Goldman Sachs’s GS Capital Partners fund. To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

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Whirlpool Advances After Appliance Maker Boosts Annual Earnings Forecast

April 26, 2010

By Andrea Snyder and Matthew Boyle April 26 (Bloomberg) — Whirlpool Corp. , the world’s largest appliance maker, advanced 8 percent in early New York trading after increasing its profit forecast for the year and posting earnings that exceeded analysts’ estimates. Earnings per share will be as much as $8.50 this year, compared with a previous forecast of at most $7, the Benton Harbor, Michigan-based company said in a statement today. Excluding some items, profit will be $8.10 to $8.60, Whirlpool said. Analysts predicted earnings of $6.83, according to the average of estimates compiled by Bloomberg. Whirlpool climbed $8.13 to $110.35 at 8:08 a.m. before the start of New York Stock Exchange composite trading . The shares had gained 27 percent this year before today. First-quarter net income more than doubled to $164 million, or $2.13 a share, from $68 million, or 91 cents, a year earlier, the maker of KitchenAid refrigerators and Maytag washing machines said. Excluding some items, profit was $2.51. Sales increased 20 percent to $4.27 billion. To contact the reporters on this story: Andrea Snyder in Washington at asnyder5@bloomberg.net ; Matthew Boyle in New York at Mboyle20@bloomberg.net .

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Campbell’s Soup Loses Out to Nestle’s Pizza, Kraft’s Macaroni and Cheese

April 5, 2010

By Matthew Boyle April 5 (Bloomberg) — Frozen pizza, microwave dinners and macaroni and cheese are eating into Campbell Soup Co. ’s U.S. sales. Discounting by Campbell, the biggest U.S. soup maker, failed to lift sales in the past month, said Alexia Howard , an analyst at Sanford C. Bernstein & Co. in New York. Campbell lost market share in the four weeks ended March 20 as its soup sales dropped 4.2 percent, according to data that market researcher Nielsen Co. released to clients last week. “The historical trend of canned soup doing well in difficult times did not play out in this recession,” Howard said in a telephone interview. “It’s a little bit unfathomable. Price-based competition from other ‘simple meals’ categories may have had an impact.” More consumers are buying competing products from Nestle SA , ConAgra Foods Inc. and Kraft Foods Inc. as sales in the $5 billion U.S. soup industry fall, according to data from the companies and research firms. The most recent decline exacerbates market-share losses over more than two decades. The share of at-home lunch meals with soup fell to 12 percent from 14.4 percent from 1985 to 2009, and dinners with soup shrank to 5.6 percent from 6.5 percent, according to market researcher NPD Group. In the same period, the percentage of meals with pizza, macaroni and cheese or a frozen entrée rose, NPD said. “Soup seems to be losing share as a category to any number of meal alternatives including frozen meals, mac and cheese, even something as simple as a sandwich that the consumer makes at home,” Cynthia Axelrod , an analyst at Glenmede Trust Co. in Philadelphia. Glenmede Trust manages $18 billion and owned 122,361 Campbell shares as of Dec. 31, according to data compiled by Bloomberg. ‘Hiccup’ Drop Campbell Chief Executive Officer Doug Conant , 58, called last quarter’s 18 percent drop in ready-to-serve soup sales a “hiccup,” blaming a lack of promotion at retailers and Campbell’s failure to fully take into account the competition from other simple meals. Conant said on a Feb. 22 conference call that soup sales would rebound this quarter, helped by marketing plans. Those actions have led to a “strongly improved trend” in the ready-to-serve business, Anthony Sanzio , a Campbell spokesman, said last week. Soup sales by volume increased in the four weeks ended March 20, he said. “We remain optimistic about our entire soup business,” Sanzio said. Soup Discounts Last month, food retailers including Albertsons, a unit of Supervalu Inc. , offered two cans of Campbell’s Chunky soup for $3, which is 50 cents more than a typical price for one can. Price Chopper Supermarkets, a chain of stores in the Northeast, was selling Chunky cans for $1, according to its Web site. Those discounts may offset the benefits Campbell gains from productivity improvements and lower ingredient costs, according to Eric Serotta , an analyst at Consumer Edge Research in Stamford, Connecticut. “Clearly, that’s going to have an impact on their margins,” he said. He recommends selling the shares. Campbell’s gross margin, the fraction of sales left after subtracting the cost of goods sold, widened to 40.5 percent in the second quarter ended Jan. 31 from 39.4 percent a year earlier. On Feb. 22, Campbell reiterated that full-year earnings would rise as much as 11 percent from $2.21 a share. Share Prices Campbell, based in Camden, New Jersey, gained 4 cents to $35.60 at 10:56 a.m. in New York Stock Exchange composite trading . Omaha, Nebraska-based ConAgra declined 1 cent to $25.22, and Kraft Foods, based in Northfield, Illinois, fell 4 cents to $30.30. Nestle, based in Vevey, Switzerland, dropped 20 centimes to 53.80 Swiss francs in Zurich trading on April 1, the last day the shares traded. Soup represents about 80 percent of Campbell’s $3.8 billion U.S. soup, sauces, and beverages unit, according to Andrew Lazar , an analyst at Barclays Capital. That division, which makes Chunky and Select Harvest ready-to-serve soups and condensed soups such as tomato and cream of mushroom, accounts for half of total sales. Eating into Campbell’s sales are frozen-pizza brands such as DiGiorno, according to Bernstein’s Howard . She rates the shares “outperform,” based on productivity improvements and lower ingredient costs that have widened gross margin. DiGiorno Pizza DiGiorno frozen pizza, which Kraft sold to Nestle this year, posted a 25 percent gain in sales in the 52 weeks ending Feb. 21, according to market researcher SymphonyIRI of Chicago. Kraft’s Macaroni and Cheese dry mixes rose 8.5 percent, according to SymphonyIRI. The data excludes Wal-Mart Stores Inc. sales. Sales of Marie Callender’s frozen meals, made by ConAgra, advanced 12 percent during that period, Teresa Paulsen , a company spokeswoman, said in an e-mail. Consumers don’t consider soup a replacement for the restaurant meals they are forgoing to save money, according to consumer-trend analyst Candace Corlett , president of consulting firm WSL Strategic Retail in New York, which surveys Americans on their shopping patterns and habits. When they go out, they eat dishes such as pasta, hamburgers, and french fries, she said in a telephone interview. “When soup sales slip in this kind of a winter, it isn’t a hiccup, it’s more like a seizure,” said Ryan Mathews, a consumer-trend analyst at Black Monk Consulting in Eastpointe, Michigan. To contact the reporter on this story: Matthew Boyle at Mboyle20@bloomberg.net .

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Food Recalls From Salmonella May Rise to 10,000 in Industry ‘Wake-Up Call’

March 11, 2010

By Matthew Boyle March 11 (Bloomberg) — Salmonella contamination at a Nevada food-flavoring plant may trigger the recall of as many as 10,000 products, according to a Consumers Union scientist. PepsiCo Inc. joined Procter & Gamble Co. , Nestle SA and McCormick & Co. yesterday in recalling food containing hydrolyzed vegetable protein, or HVP. The widespread use of the flavoring means more companies will follow, said Michael Hansen, senior scientist at Consumers Union, the Yonkers, New York-based advocacy group that publishes Consumer Reports magazine. More than 100 items, including two flavors of P&G’s Pringles and a store-brand ranch dip found in Wal-Mart Stores Inc., had been pulled as of yesterday, according to the U.S. Food and Drug Administration’s Web site. Soups, sauces, chili, hot dogs, snack foods, dips and dressings are among the processed foods that often contain the vegetable protein, according to the FDA. “It’s a wake-up call for the food industry as a whole to be more thorough in evaluating the safety of ingredients,” said Michael Doyle, director of the Center for Food Safety at the University of Georgia. “Big companies are putting their trust in suppliers, which is their Achilles heel.” The tally of products will rise over the next few weeks, FDA officials said March 4, declining to provide an estimate. The recall has the potential to be the largest ever by number of products, although the total isn’t yet known, said Rita Chappelle , an FDA spokeswoman. The contaminated HVP was made by Las Vegas-based Basic Food Flavors and discovered by one of its customers, which alerted the FDA, officials of the agency said on a March 4 conference call. Dave Wood, director of sales and marketing at Basic Food Flavors, wasn’t available to comment. No Illnesses To date, there are no known illnesses associated with the contaminated HVP, which is sometimes referred to as a “natural flavor” on ingredient labels. The FDA has said the overall risk to consumers is low because most products containing HVP are cooked during processing or are cooked by consumers, which would eliminate any salmonella. In uncooked, ready-to-eat products, like chips and dips, the risk is greater. In an inspection report sent to Basic Food Flavors, FDA investigators said they found salmonella on “non-food contact surfaces” near some food processing equipment. The contaminations were found where the HVP powder is mixed with other ingredients to be packaged into final products, according to the report. Basic Food Flavors continued to make and distribute HVP for several weeks after it knew its plant was contaminated, the FDA said in the report. ‘Abundance of Caution’ PepsiCo said yesterday in a statement that it voluntarily recalled its Quaker Baked Cheddar Snack Mix. HVP is a “very minor” ingredient in the seasoning of the snack, which was recalled “out of an abundance of caution,” the Purchase, New York-based company said. On March 5, McCormick, the seller of spices and herbs, recalled four products, including a French onion dip mix. Three days later, a North American unit of Nestle said it was recalling about 6,000 pounds (2,722 kilograms) of a ready-to-eat bacon base product. The same day, Cincinnati-based P&G recalled the two flavors of Pringles. Wal-Mart’s Great Value Ranch Chip Dip, manufactured for the world’s largest retailer by the T. Marzetti Co. of Columbus, Ohio, has been pulled from the shelves, according to Wal-Mart spokeswoman Anna Taylor. PepsiCo rose 7 cents to $64.43 yesterday in New York Stock Exchange composite trading. McCormick , based in Sparks, Maryland, rose 13 cents to $38.10. Nestle, based in Vevey, Switzerland, rose 35 centimes to 53.90 Swiss francs in Zurich. Rising Costs The costs associated with tainted products for food companies worldwide will balloon to as much as $15 billion annually in coming years, up from about $400 million in 2004, according to Constanze Freienstein, a senior principal at A.T. Kearney’s consumer and retail practice in Chicago. Eating products containing salmonella can cause fatal infections in young children, frail or elderly people. A nationwide salmonella outbreak traced to a South Georgia peanut processing plant in late 2008 was blamed for at least nine deaths and hundreds of illnesses. Legislation passed last year by the House and held up in the Senate would require companies to check their products and manufacturing process for contaminates, said Chappelle , the FDA spokeswoman. Under the proposed law, the FDA would be able to mandate food recalls when contaminations occur, a process that is currently voluntary for companies, she said. “We’re dealing with much more complicated processes and contaminations than when the current law was passed,” Sandra Eskin, director of the food safety campaign with the Pew Health Group, said in a telephone interview yesterday. “This is a legislative shift that’s necessary so the FDA will have authority to develop food safety plans, see where contaminations could occur, and set up procedures to prevent them from happening.” To contact the reporter on this story: Matthew Boyle at Mboyle20@bloomberg.net .

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