Altice USA's sweetened bid for Cogeco is swiftly rejected

News Analysis Jeff Baumgartner, Senior Editor, Light Reading 10/18/2020

Altice USA still isn't taking no for an answer. But Altice USA appears to be getting no closer to a "yes" to its unsolicited offer for Canada-based operator Cogeco Communications.

Roughly a month after Altice USA's original bid for Cogeco Communications was flatly rejected by the Cogeco boards and a family-owned business with majority voting rights in Cogeco, Altice USA on Sunday put forth a revised, sweetened offer that still aims to acquire Cogeco, retain Cogeco's US assets (primarily Atlantic Broadband) and then sell Cogeco's Canadian assets to Toronto-based Rogers Communications.

However, Gestion Audem, the company controlled by members of the Audet family that holds 69% of all voting rights of Cogeco, swiftly rejected Altice USA's follow-up offer.

"As we did on September 2nd, 2020, following the announcement of their first unsolicited proposal, members of the Audet family unanimously reject this further proposal," Louis Audet, president of Gestion Audem, said in a statement released Sunday night. "Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal. We are not interested in selling our shares."

Update: Cogeco Inc. and Cogeco Communications jointly announced Monday that the corporations have received the revised proposal from Altice USA and Rogers and that the proposal will be submitted to and reviewed by the corporations' board of directors.

Altice USA holds that its latest offer boosts the value to holders of subordinate voting shares in Cogeco while also enhancing the premium to the Audet family.

Under its revised bid, Altice USA said it would sell all the Canadian assets of Cogeco to Rogers at an adjusted net price of C$5.2 billion ($US $3.94 billion), if the transaction with Cogeco is completed. The aggregate all-cash offer for the outstanding shares of Cogeco Inc. (CGO) and Cogeco Communications (CCA), including those already owned by Rogers, rises to C$11.1 billion ($8.4 billion). The original aggregate offer was C$10.3 billion (US$7.8 billion).

Altice USA's revised bid also includes C$900 million (US$682 million) to the Audet family for its ownership interests, up from an earlier offer of C$800 million (US$607 million). Altice USA reiterated on Sunday that it needs support from the Audet family to get a deal done. Gestion Audem continues to make it clear that it has no interest in selling or negotiating.

One-month countdown

Altice USA said the revised offer will be withdrawn if it is unable to "arrive at a mutually satisfactory" agreement by November 18, or if "it does not see a clear path forward to completion of a transaction."

"We encourage the Cogeco board to act in the best interest of all shareholder and stakeholders as they thoughtfully consider this offer, and we respectfully request that the boards engage with us to discuss our proposal," Dexter Goei, Altice USA's CEO, said in a statement.

Altice USA's new offer also follows a recent pledge by Rogers to invest up to $3 billion to improve infrastructure in Quebec, including rural connectivity expansions and an accelerated deployment of 5G coverage there. Rogers, which has a 33% economic stake in Cogeco, has also pledged to keep Cogeco's headquarters in Montreal, to place a Quebec president in charge of leading its business in the province, to retain the Cogeco brand, and to continue relationships with local suppliers and contractors.

Cogeco, meanwhile, has argued that a key motivator driving Rogers's interest in acquiring Cogeco's Canadian assets is to keep Cogeco out of the mobile business and discourage the launch of a mobile service that would compete with Rogers's. Cogeco is attempting to enter the wireless business in Canada under a proposed Hybrid Mobile Network Operator framework that is currently under review by the Canadian Radio-television and Telecommunications Commission (CRTC).

Adding to the animosity that's been brewing, James Cherry, the lead director for CCA and CGO, has also accused Altice USA and Rogers of engaging "in bad faith tactics, some of which created confusion in the market" regarding the way the unsolicited bid was first made public on September 2 without directly disclosing that the Audet family had rejected the deal the prior evening.

In his statement on Sunday, Audet noted that the Cogeco stock prices and the operating results "far outperform" those of either Altice USA and Rogers.

"Rogers has freely chosen to accumulate shares in the Corporations with full knowledge of the implications," Audet said. "The Audet family regrets that Rogers' capital allocation decision is causing the Rogers family and Board such anguish."

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— Jeff Baumgartner, Senior Editor, Light Reading