MONTREAL – Cogeco Communications announced today that following the satisfactory completion of the due diligence process, its Canadian subsidiary Cogeco Connexion has entered into a definitive agreement to purchase DERYtelecom, the third-largest cable provider in the province of Quebec, for C$405 million.

DERYtelecom is based in Saguenay, Quebec and offers Internet, television and telephony services to approximately 100,000 customers in over 200 municipalities across several regions in Quebec, including Estrie, Lanaudière, Montérégie and the Laurentians. Revenue and adjusted EBITDA for the fiscal year ended August 31, 2020 are estimated to be $105 million and $44million, respectively.

Acquisition Rationale

DERYtelecom will be purchased for $405 million. As the transaction will be executed essentially through an asset purchase, Cogeco Connexion expects to realize tax benefits with a present value of approximately $40 million. These benefits are due to the tax amortization of tangible and intangible assets which are both stepped up to current market value in an asset purchase transaction. The transaction represents an acquisition multiple of 7.8x EBITDA, accounting for the projected synergies and tax benefits.

The purchase price will be financed with a combination of cash on hand and Cogeco’s term revolving facility. The transaction is subject to regulatory approvals under the Competition Act along with other customary closing conditions and is expected to close no later than the second quarter of the fiscal year 2021.