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Cogeco stiff-arms Altice USA/Rogers takeover bid

Altice USA's and Roger Communications plans to divvy up Cogeco have run aground.

Cogeco Inc. and Cogeco Communications said independent members of their respective boards have flatly rejected the unsolicited, non-binding, joint proposal from Altice USA and Rogers that aims to divvy up Cogeco's US and Canadian assets.

Cogeco did not elaborate on the reasons behind the board rejections, but the proposal was in a tough spot even before they rebuffed it. Gestion Audem Inc., a company controlled by members of the Audet family that holds key stakes in Cogeco, had already indicated that it would not support the proposal.

Altice USA made its $7.8 billion all-cash offer to acquire all outstanding shares of Cogeco on Wednesday. Under a somewhat complex deal, Altice USA's plan is to acquire the US assets of Cogeco (Atlantic Broadband, an operator that serves parts of 11 US eastern states), and to sell Cogeco's Canadian assets to Toronto-based Rogers.

Altice USA acknowledged that it would need additional support from the Audet family to pull it off. Altice had baked into the offer C$800 million ($612 million) to acquire the Audet family's ownership interests, which includes 100% of the multiple voting shares of Cogeco Inc. and about 0.9% of the total outstanding Cogeco Communications subordinate voting shares.

Dave Heger, an analyst at Raymond James, told Yahoo News that the bid represented "a hostile takeover of sorts," noting that it is unusual for such an offer to go public without buy-in from a key controlling shareholder.

"Maybe they thought that if they went public with it, maybe the public shareholders would feel the pressure of selling," he told the outlet.

Altice USA and Rogers, the largest long-term shareholder of Cogeco, have been asked for comment on the rejection of the offer and if they intend to sweeten it.

Update: Altice USA and Rogers said they are standing by the offer but are open to discussion. "We strongly believe that we presented a very attractive offer – one that would reward all Cogeco shareholders with a significant premium – and we stand by that offer," they said in a joint statement issued Thursday afternoon. "We remain committed to pursuing this transaction and are open to engaging with shareholders and the boards in a constructive dialogue."

For now, the rejection puts a stopper on a deal that would further consolidate the US and Canadian cable markets and enable both Altice USA and Rogers to add more scale to their respective cable operations.

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— Jeff Baumgartner, Senior Editor, Light Reading

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