Stonepeak opens Fund IV investing with $8.1bn broadband deal

TPG Capital agreed to sell the US company Astound Broadband to Stonepeak and a management business called Patriot Media.

The first investment from Stonepeak Infrastructure Partners’ fourth flagship infrastructure fund is an $8.1 billion acquisition of US communications company Astound Broadband.

Stonepeak is partnering with Patriot Media, which will manage Astound’s portfolio of broadband providers, to purchase the company from private equity firm TPG Capital. Stonepeak and Patriot are paying $3.6 billion in equity and assuming $4.5 billion in debt, according to a source familiar with the transaction, which is expected to close by Q2 of 2021.

Astound is the parent company of four regional broadband providers – RCN Telecom Services, Grande Communications, Wave and Entouch – and manages 23,000 miles of internet fibre serving more than 1 million customers across many of the US’s largest metropolitan areas, according to a statement.

The deal is the latest in a voluminous year for transactions in the communications sector, which has seen investor interest skyrocket after it became apparent that internet connectivity will be more important than ever during the coronavirus pandemic, which has forced people to stay at home and businesses to work remotely.

The $8.1 billion transaction is one of the largest infrastructure deals of the year and also marks the opening of the investment period for Stonepeak’s latest infrastructure fund. Stonepeak Infrastructure Partners IV has so far raised $8 billion of the firm’s $12 billion target.

Stonepeak has set terms for Fund IV that match those of previous vehicles, including a 1.5 percent management fee, a 20 percent carry and an 8 percent hurdle. The firm targets a net internal rate of return of 12 percent for all its flagship funds and has been meeting or exceeding that target according to documents published by the Employees’ Retirement System of Rhode Island.

Last week, Stonepeak informed investors that one of the firm’s founders, Trent Vichie, plans to retire by the end of next March.

Stonepeak declined to comment for this story.