WideOpenWest, Inc. (WOW) inked two separate deals to sell 5 of its service areas, with total gross proceeds of $1.786 billion. Shares of the broadband service provider soared to an all-time high of $21.34 on the announcement.
Shares gained 13.4% in just one day on June 30, to close at $20.71, compared to a gain of 24.6% in the past month. Shares have increased a whopping 278% over the past year. (See WideOpenWest stock chart on TipRanks)
The company stated that its Cleveland and Columbus service areas will be sold to Atlantic Broadband, a U.S. cable operator and a subsidiary of Cogeco Communications Inc. (TSE: CCA) for $1.125 billion.
The company’s Chicago, Evansville, and Anne Arundel, Maryland service areas will be acquired by Astound Broadband for $661 million.
Both deals are expected to close in the second half of the year, subject to certain closing conditions.
Teresa Elder, the company’s CEO, said, “The divestiture of these markets will enable us to reduce our debt as we continue to execute our broadband-first strategy, including pursuing our Edge-out and greenfield strategies and expanding our commercial services.”
Upon completion of the deals, the company will benefit from lower net debt. Its leverage ratio is expected to reduce to 2.5x from the previous ratio of 5.0x reported on March 31, 2021.
Following the news, Benchmark Co. analyst Matthew Harrigan stated that he is optimistic about the deleveraging transactions. However, he believes that the divestiture significantly reduces the operating scale of the company’s business.
Harrigan reiterated a Buy rating on the stock with a price target of $25, implying 20.7% upside potential.
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 5 Buys and 2 Holds. The average WideOpenWest price target of $23.67 implies 14.3% upside potential from current levels.
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