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Knology, a provider of interactive communications and entertainment services, reported the signing of a definitive agreement to acquire the assets of Sunflower Broadband, a provider of video, voice and data services to residential and business customers in Douglas County and Lawrence, Kansas, for $165 million cash.

Company officials said Sunflower is expected to generate approximately $51 million in revenues and $22 million in EBITDA, pre-synergies, for calendar year 2010. Synergies are expected to be approximately $5 million. The transaction, which is structured as an asset purchase, provides Knology (News - Alert) with a valuable step-up in the tax basis of the assets acquired.

Knology plans to fund the proposed transaction by using a portion of its cash on hand and by accessing the capital markets in a manner which will allow it to manage the leverage profile of the business, while maintaining the flexibility to continue to grow the business with a disciplined approach.

The company also announced its financial and operating results for the second quarter, which recorded total revenue of 2010 to be $113.0 million compared to revenue of $110.1 million for the previous quarter and $107.9 million for the same period in 2009.

Knology reported EBITDA, as adjusted, of $39.4 million for the second quarter of 2010. EBITDA, as adjusted, was $37.7 million in the previous quarter and $37.0 million in the second quarter of 2009.

Knology announced a net income of $5.4 million, or $0.15 per share, for the second quarter of 2010 and net income of $2.5 million, or $0.07 per share, for the previous quarter. For the second quarter of 2009, excluding the non-cash charge, the company posted net income of $2.9 million, or $0.08 per share, the company said.

With the non-cash gain/charge related to the accounting treatment of the interest rate swaps included, Knology reported net income for the second quarter of 2010 of $7.6 million, or $0.21 per share, compared with a net loss of $815,000, or $ 0.02 per share, for the previous quarter and net income of $1.3 million, or $0.04 per share, for the second quarter of 2009 $37.0 million in the second quarter of 2009.

During the seasonally slow second quarter total connections decreased 4,946, the company said. The company ended the quarter with 698,717 total connections. Voice connections increased 179 whereas the video and data connections decreased 3,743 and 1,382, respectively. Business connections increased 415 during the period to 107,055 connections, while it was 104,372 business connections a year back.

Average monthly revenue per connection increased to $53.73, compared to $52.65 for the second quarter of 2009. Average monthly connection churn was 2.7 percent in the second quarter of 2010, comparing favorably with churn of 2.8 percent for the same period one year ago.

Rodger L. Johnson, chairman and chief executive officer of Knology, stated “The core business is continuing to perform well in this challenging economic environment, and we continue to experience success with our fill-in investments and wireless backhaul opportunities. We will stay focused on taking care of the customer and working hard to deliver increased shareholder value.”

“The free cash flow profile of the business remains very healthy, and along with a solid balance sheet, positions the Company for disciplined growth on a go forward basis. We are fortunate to be in a position to add the Sunflower asset to the Knology operations without putting pressure on our balance sheet. The Sunflower team is going to be a great fit with Knology and together we will create an even stronger organization,” Todd Holt, Knology’s president and chief financial officer, said.

In May Knology announced a partnership with Metaswitch Networks to use Voice over Internet Protocol or “VoIP” applications and switching infrastructure from that company.