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Altice USA undaunted after Cogeco spurns offer

Altice USA isn't taking no for an answer.

After being rebuffed by the Cogeco boards as well as a family-owned business with critical stakes and voting rights in Cogeco, Altice USA remains committed to getting a deal done with the Montreal-based company, Dexter Goei, Altice USA's CEO, said today at the Bank of America Media, Communications & Entertainment Conference.

Altice USA's offer, announced on September 2, is to acquire Cogeco at a premium, retain Cogeco's US assets (namely Atlantic Broadband) and then sell Cogeco to Rogers Communications, a Toronto-based operator that also happens to be Cogeco's largest long-term shareholder.

"This is a marathon, not a sprint. We're committed to trying to come to an end game," Goei said. "From our standpoint, that's very simple, which is we'd like to ... acquire [Cogeco's] US assets."

Goei said the opportunity to make the offer for Cogeco followed an introduction to Rogers, which has about 6% voting rights in Cogeco. Altice USA was merely striking while the iron was hot.

"It's not a question in any shape or form of us needing to do anything in particular, it's just that you need to be reactive in M&A situations. And this was a perfect opportunity for us to be reactive," Goei said, noting that Altice USA is coming off its two best quarters of operational performance. "This is not something that comes along every day, and that's not something you can plan for, either."

Goei said Altice USA is "committed ... to continuing this process and this project and we'll see where it ends up."

A tall task
Goei has his work cut out for him. The respective boards of Cogeco Inc. and Cogeco Communications quickly rejected Altice USA's $7.8 billion offer. And Gestion Audem Inc., a company controlled by members of the Audet family that holds key stakes and 69% voting rights in Cogeco, has also spurned the offer. Gestion Audem made it clear it won't try to negotiate a sweeter deal, either.

"Our shares are not for sale," Louis Audet, who represents the Audet family on behalf of Gestion Audem, said Monday. "And let me be clear, our refusal is not a negotiating position, it is definitive."

Adam Shine, an analyst at National Bank of Canada, told Bloomberg that the outright rejection means the time might be nigh for Rogers to consider selling its stake in Cogeco.

Goei believes that Rogers would much rather try to further consolidate the Canadian market. "But just as importantly they have a large stake in that company that is effectively dead money from their standpoint because it's been there for a very, very long time and they'd like to be able to sort out their situation one way or the other," he said.

Goei also expanded on Altice USA's strategic interest in acquiring Atlantic Broadband, holding that its presence in 11 US states up and down the East Coast present "somewhat of a perfect match" from a geographic standpoint. Plus, a deal for Atlantic Broadband would bring more scale to Altice USA's overall business, which includes the Optimum footprint in New York, New Jersey and Connecticut alongside Suddenlink's reach in more rural parts of the US.

"Size matters in our space for the technology investments, for the infrastructure investments, for the content costs and for all of the amortization of the operational costs of the business," Goei said.

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— Jeff Baumgartner, Senior Editor, Light Reading

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