In a complex move that could drive more consolidation into both the US and Canadian cable markets, Altice USA has made a $7.8 billion all-cash offer to acquire all outstanding shares of Cogeco, with plans to then sell Cogeco's Canadian assets to Toronto-based Rogers Communications.
When all the dust settles, Altice USA would retain all of the US assets of Cogeco, namely Atlantic Broadband. Quincy, Massachusetts-based Atlantic Broadband, a top ten US cable operator, offers service in parts of 11 states: Connecticut, Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, South Carolina, Virginia and West Virginia.
Altice USA said the deal would add more scale to its business and complement a current US footprint covering parts of New York, Connecticut and New Jersey (the former Cablevision Systems areas now being operated by Altice USA under the "Optimum" brand), and Suddenlink's systems in more rural parts of the US.
According to the financial terms, Altice USA said it would pay C$10.3 billion (US$7.8 billion) for all outstanding shares of Cogeco Inc. and Cogeco Communications, including about C$4.8 billion ($3.6 billion) to be paid by Altice USA for Cogeco's US assets.
Altice USA acknowledged it will require additional support from a family with close corporate ties to Cogeco. Noting that all of the multiple voting shares of Cogeco Inc. are held in a company controlled by Cogeco Executive Chairman Louis Audet and members of the Audet family, Altice USA said its offer also includes C$800 million ($612 million) to the Audet family for their ownership interests (100% of the multiple voting shares of Cogeco Inc. and about 0.9% of the total outstanding Cogeco Communications subordinate voting shares).
Altice USA believes it's presenting a sweet deal, noting that the per-share offer represents a 30% premium to each stock's one-month (August 2020) volume weighted average price on the Toronto Stock Exchange.
"We are pleased to present this very attractive offer for Cogeco, and are confident that Mr. Audet and the Cogeco boards will act in the best interest of all shareholders and fairly evaluate this offer," Dexter Goei, CEO of Altice USA, said in a statement." We look forward to the opportunity to extend Altice USA's high-quality broadband, video, mobile, and news offerings to more than 1.1 million additional homes and businesses."
Cogeco has been asked for comment.
Update: Altice USA has more convincing to do. Cogeco announced today that it has received the non-binding proposal and that it will be submit it to its board for review. However, it added that Gestion Audem Inc., the company controlled by members of the Audet family, "has already indicated that it does not intend to sell its shares and will not support the proposal."
Altice USA, which recently acquired Service Electric Cable TV of New Jersey, said it expects to wrap the deal within six to nine months after signing the definitive agreements.
Rogers on board
Rogers confirmed the agreement with Altice USA in a separate announcement, and likewise touted the potential to add more scale to its cable business.
Rogers, the largest long-term shareholder of Cogeco, currently owns 41% of the outstanding Cogeco Inc. subordinate voting shares and 33% of outstanding Cogeco Communications subordinate voting shares.
"Rogers is excited about the opportunity to expand its breadth of industry leading technologies and products to an additional 1.8 million homes and businesses," Rogers President and CEO Joe Natale said in a statement.
A Rogers acquisition of Cogeco's Canadian assets could end up benefitting Comcast. Rogers' relatively new "Ignite TV" platform is based on an X1 syndication deal with Comcast, and it follows that Rogers would likely extend that product to Cogeco's Canadian systems.
The Altice USA-Rogers tag-team could feed into other cable consolidation moves that appear to be in motion. Reuters reported this week that private equity firm TPG Capital is considering the sale of Astound, a service provider conglomerate comprising three midsized US cable operators – RCN, Grande Communications and Wave Broadband.
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— Jeff Baumgartner, Senior Editor, Light Reading