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Time Warner Cable to buy DukeNet Communications

Time Warner Cable will buy the Charlotte-based regional fiber optic network company DukeNet Communications for $600 million including the repayment of debt, the cable company said Monday.

Duke Energy owns half of DukeNet, while investment funds managed by Alinda Capital Partners own the other half.

DukeNet, based in Charlotte, provides data and high-capacity bandwidth to customers including wireless carriers, data centers and government. The 8,700-mile network serves the Carolinas and five other states in the Southeast.

Time Warner said the acquisition will help expand its fiber footprint, where business services is a key growth area. Duke said the sale will complete its cutting of ties to a non-core business.

The sale is expected to close in the first quarter of 2014. It is expected to net Duke Energy $210 million after payment of debt and transaction costs, according to a securities filing.

“The deal itself is minor when looked at in light of (Duke Energy’s) $100 billion in assets, but it represents the first sale transaction of a (Duke) asset in quite some time – a fact that investors should take as a positive, in our opinion,” Barclays analyst Daniel Ford said in a research note.

Charlotte-based Duke Energy created DukeNet in 1994, selling 50 percent of its stake to Alinda in 2010 for $137 million. At the same time, DukeNet announced it had closed on a $150 million credit facility to expand its network and make future acquisitions.

One Time Warner Cable investor, Chris Marangi, portfolio manager at Gabelli & Co, told Reuters he liked the deal even if it “does not move the needle.”

“It’s an investment in an area that has very high returns for them,” Marangi said.

Time Warner Cable reported a 21.8 percent jump in business-services revenue, to $565 million, for this year’s second quarter while residential services revenue remained flat. The company, based in New York, employs about 3,250 people in Charlotte across multiple facilities, including a large corporate campus off Arrowood Road.

Time Warner Cable stock closed at $111.02, down $1.77.

Henderson: 704-358-5051; Twitter: @bhender
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