Time Warner Cable to buy Insight for $3 billion

NEW YORK Time Warner Cable said it will buy cable operator Insight Communications from Carlyle Group for $3 billion in cash to broaden its presence in the U.S. Midwest.

The deal was reached after months of negotiations and a fruitless auction of Insight that involved other strategic and private equity bidders, including Cablevision Systems Corp and Charter Communications.

TWC dropped out of the auction because it believed Carlyle was asking for too much, TWC Chief Executive Glenn Britt told Reuters in an interview on Monday.

Carlyle originally was seeking $3.5 billion to $4 billion, sources said earlier this year.

"We've been very consistent in saying that we would only buy at the right price -- one where we think there's a good return for our owners," said Britt.

Executives at TWC have said any acquisition targets will not be valued at higher multiples than TWC's own stock.

Insight is the 10th-largest cable operator in the United States. It sells cable television, high-speed Internet and telephone services and serves 750,000 customers in Illinois, Indiana, Kentucky and Ohio.

TWC, the No. 2 U.S. cable operator, believes it can create annual cost efficiencies of around $100 million through programing expense savings and cost reductions.

It also expects tax benefits from inheriting Insight's $300 million in net operating losses.

"We will continue to return excess capital to shareholders consistent with our target leverage ratio of 3.25 times, including the impact of this acquisition on our existing and expected leverage," TWC Chief Financial Officer Irene Esteves said in a statement.

Insight is owned by private equity firms Carlyle Group, Crestview Partners and MidOcean Partners, and Insight management.

It is TWC's biggest acquisition since it was spun off from former parent Time Warner Inc in 2009. Earlier this year it paid $260 million for NewWave Communications, a small cable operator with cable systems in the Midwest.

TWC shares were down 27 cents to $65.24 in early trading.

(Reporting by Yinka Adegoke; additional reporting by Sayantani Ghosh in Bangalore; Editing by Roshni Menon and John Wallace)