Hicks, DirecTV Bolster DirecPath

Target: Apartment MediaWorks

Price: Undisclosed

Sponsors: Hicks Holdings, DirecTV Group

Financial Advisor: Target: Daniels & Associates LP

Legal Counsel: Sponsors: Weil, Gotshal & Manges LLP

Accountant: Sponsors: KPMG

In May, private equity firm Hicks Holdings teamed up with satellite television company DirecTV to form a bundled communications provider called DirecPath. The goal of the new company is to capitalize on the relatively untapped multiple dwelling unit (MDU) market in the Southeastern United States and Texas—providing its services to entire apartment and condominium complexes rather than to individual family homes.

The company is perusing a buy-and-build approach to gain market share and, thus far, has completed two small acquisitions, including Georgia-based National Satellite and Florida-based Glades Communication.

Earlier this month however, DirecPath signed up for a deal that promises to give it some real traction in its target market. In what Hicks Holdings Chairman and CEO Tom Hicks called the company’s “first transaction of significant size,” DirecPath agreed to acquire Apartment MediaWorks LLC for an undisclosed amount.

MediaWorks is based in Atlanta and provides video, broadband and voice over Internet protocol (VoIP) to more than 40,000 units throughout the Southeast owned by national and local property owners, pension funds and REITs.

“Running a company like this—that’s focused exclusively on MDUs—requires a lot of local developer knowledge to get in with the [property] owners,” DirecPath CEO Paul Savoldelli, told Buyouts.

He noted that most cable companies purposefully steer clear of MDU’s, opting instead to focus their resources on higher-revenue subscribers, such as single-family homes, “About once a year every [MDU] unit has turnover, and these company’s hate churn,” Savoldelli said.

But DirecPath is set up specifically for the apartment lifestyle and its inherent high turnover rates. The company uses the DirecTV product for its video services, placing a single master dish on the MDU’s roof, which frees up tenants’ balconies for personal use. The broadband and VoIP services are piped in via cable.

Moreover, DirecPath’s servicemen are assigned regular, twice-weekly routs to each MDU the company serves, enabling it to tend to any customer, no matter where they are, in no more than a few day’s time.

“Eighty percent of the time we are granted exclusive right of entry with the building owner, and the tenants are free to decide which of our products they want,” Savoldelli said.

The company’s growth plan is to continue acquiring local and regional private cable companies and apply three things to them: capital, management and technology. “Several [providers] have one or two of these things, but none that we’ve identified have all three,” Savoldelli said. He noted that the company’s target market—Southeastern states and Texas—is home to about 33 million apartment and condo units.

“The private cable business is alive and well, but it’s highly fragmented and undercapitalized,” Savoldelli said. “There are large players to be sure, but there is no dominant player in the market, so it’s a great place to apply the buy-and-build strategy.”

“Apartment MediaWorks happened to be the largest private cable operator in the southeast, and is well-positioned in Georgia and Florida, two of our key markets,” he added.

Ownership of DirecPath is currently split 80%/20% with Hicks Holdings in possession of the larger bit. However, DirecTV has plans to eventually up its holdings, making the company a 50%/50% joint venture sometime in the future. —A.N.