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SEC Filings

AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
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   Members of our management and investors formed Avalon in 1997 to acquire,
operate and develop cable television systems in mid-sized suburban and exurban
markets characterized by attractive growth prospects and fewer multi-channel
television competitors. We seek to acquire cable television systems in markets
with high projected household growth rates and with relatively low basic
penetration, where we believe we can increase the number of basic subscribers
and revenues per subscriber on a cost effective basis. We believe that less
direct competition in our targeted markets will result in greater stability in
operating cable television systems as well as relatively lower acquisition
costs as compared to larger, more competitive markets. Our strategy is to
assemble two or more regional clusters, each consisting of 200,000 to 300,000
basic subscribers so as to develop a critical mass of operations capable of
achieving economies of scale while maintaining geographic diversity for our
company as a whole. As of December 31, 1998, on a pro forma basis including all
of the completed and pending acquisitions:
  . our systems would have passed approximately 403,600 homes,
  . our systems would have served approximately 247,300 basic subscribers,
    with approximately 221,200 located in Michigan and approximately 26,100
    located in western New England and upstate New York,
  . we would have been one of the leading cable system operators in the State
    of Michigan, and
  . we would have been one of the 30 largest multiple system cable operators
    ("MSOs") in the United States.
   On November 6, 1998, we completed our acquisition of Cable Michigan. As of
December 31, 1998, Cable Michigan served approximately 211,500 basic
subscribers clustered in four main areas in Michigan: Grand Rapids, Traverse
City, Lapeer and Monroe. We acquired Cable Michigan because of its strong
growth prospects. From 1993 to 1997, Cable Michigan's basic subscribers grew at
a compounded annual rate of 4.6% as compared to the national average of 2.9%
According to Market Statistics, 1997, a publication containing county-wide
demographic information published by Bill Communications ("Market Statistics
1997"), the number of households in Cable Michigan's territory is projected to
grow at a rate equal to approximately 175% of the national average and
approximately 200% of the Michigan average over the next five years. In
addition, we believe there exists a substantial opportunity to increase Cable
Michigan's basic and premium penetration rates through aggressive marketing and
improved customer service. As of December 31, 1998, Cable Michigan's systems
had a basic penetration rate of 60%, compared to the national average of 69%
(according to Paul Kagan Inc.), and a premium penetration rate of 26%, compared
to the national
average of 72% (according to Paul Kagan Inc.). The total consideration that we
paid in connection with the Cable Michigan acquisition, excluding the amounts
to be paid in the Mercom transaction and related fees and expenses, was
approximately $425.9 million, net of option exercise proceeds. At this time,
Cable Michigan owned approximately 62% of the outstanding shares of Mercom,
Inc. ("Mercom").
  On March 26, 1999, we completed the acquisition of the remaining 38% from the
public shareholders of Mercom. The total consideration for that acquisition,
including related fees and expenses, was approximately $21.9 million. Prior to
the completion of our acquisition of Cable Michigan, Cable Michigan, with our
assistance, entered into agreements to acquire two additional cable systems,
Nova and Cross Country, which served, on a combined basis, approximately 8,300
basic subscribers in Michigan as of December 31, 1998. We completed the
acquisition of Nova in March 1999 and the acquisition of Cross Country in
January 1999. In addition, we consummated the acquisitions of the assets of
Novagate Communications Corp. ("Novagate"), an Internet service provider, and
the cable system assets of R/COM, L.C. ("R/COM"), in March 1999 which served
approximately 5,000 Internet and 800 basic subscribers, respectively, as of
March 1999. We have also entered into agreements to acquire the assets of
Traverse Internet, Inc. ("Traverse Internet"), an Internet service provider
which had approximately 5,000 Internet subscribers as of March 1999 and certain
cable system assets of Galaxy American Communications ("Galaxy") which had
approximately 600 basic subscribers as of March 1999. The combined purchase
price for these pending acquisitions is approximately $2.9 million.