Case History

"When the time was right to make a contrarian play in the cable industry, we wanted to work with the right financial partner. We wanted to be able to count on a private equity shop to support our acquisition-driven, build-up strategy. We had worked together once before with Charterhouse and therefore it was an easy decision to return. The firm gave us more than capital and together we invested in a vision."

-- Howard Wood

In 1994, Charterhouse partnered for the second
time with three outstanding managers to pursue a consolidation strategy in the cable television industry. Howard Wood, Barry Babcock and Jerry Kent had been previously successful in building Cencom Cable with Charterhouse over the period from 1983 to 1991. When the team reapproached Charterhouse in 1994 with a new game plan, we committed over $30 million to fund a new entity, Charter Communications. Seven additional investments totaling approximately $55 million were made during 1994 and 1995 as part of Charter's buy-and-build strategy.

From 1994 to 1998, Charter evolved from a business plan into a significant cable television operator with 1.2 million subscribers. The growth was achieved through both acquisitions of cable properties and the subsequent increased penetration of homes passed within those acquired systems. Charter enjoyed subscriber growth above the industry average - primarily due to the expansion in communities served by the Charter franchise. In order to increase revenue per subscriber, the Company's management team implemented an aggressive system upgrade program which enabled it to offer subscribers additional services, such as added channel capacity, cable modems and digital set top boxes.

In December 1998, Charter was sold to Paul Allen for $4.5 billion. Charterhouse realized an internal rate of return of almost 50% and a 4.8x multiple of invested capital on its aggregate investment.

Charter Communications embodied Charterhouse's operating philosophy because the fundamental investment thesis was to support an entrepreneurial management team, the investment's success was enhanced by the execution of a well-developed buy-and-build consolidation strategy and Charterhouse's deep experience in the cable industry allowed the firm to contribute more than just capital to the endeavor.

In 2002, after having successfully invested with the team in two prior investments (Charter Communications and Cencom Cable), Charterhouse partnered once again in AAT Communications, another portfolio company which pursued and achieved a successful build-up in the wireless tower sector (see separate case study).