Additional deal would have seen Rogers get Canadian ops for $4.9 billion
By Greg O’Brien
NEW YORK – It was a fast news cycle for Cogeco on Wednesday.
The day opened with the announcement Altice USA, which owns broadband and cable providers Optimum (formerly Cablevision) and Suddenlink, among other assets, offered to buy Cogeco Inc. (CGO) and Cogeco Communications Inc. (CCA) for C$10.3 billion. It submitted the offer to Cogeco on Tuesday after the close of markets and announced it had done so before they opened on Wednesday morning.
Altice also said it entered into an arrangement to sell all of Cogeco’s Canadian assets to Rogers Communications, which is a long-term, large shareholder of Cogeco, for $4.9 billion. Rogers owns 41% of the outstanding CGO subordinate voting shares and 33% of outstanding CCA subordinate voting shares.
If the offer had been accepted, Altice USA would have taken ownership of all the U.S. assets of Cogeco, namely Atlantic Broadband, and Rogers would take ownership of Cogeco’s networks in Ontario and Quebec, as well as its chain of radio stations in Quebec. Under the terms of the agreement with Altice, Rogers would have been entitled to receive the premium offered by Altice USA to all subordinate voting shareholders. As a result, the net consideration to be paid by Rogers for the Canadian assets of Cogeco reflects a gross price of $5.5 billion, less the premium on the shares currently held by Rogers of $600 million, less the current value of Rogers’ shares of $1.5 billion, for a net cash consideration of $3.4 billion.
Atlantic Broadband is currently the ninth largest cable operator in the U.S, providing broadband, video and telephony in Connecticut, Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, South Carolina, Virginia and West Virginia.
In Canada, Cogeco Connexion provides the same services in and around Trois Rivieres, Quebec, where it was founded, as well as in southern Ontario, with the bulk of its customers in the Golden Horseshoe (Hamilton-Burlington-Oakville-St Catharines-Niagara). The company also has other regional systems in places such as North Bay, Ont. It has approximately 630,000 video customers, 800,000 broadband customers and 370,000 telephony customers in Canada.
Cogeco also owns 22 radio stations in Quebec.
However, the offer was quickly kicked aside and reading between the lines, Cogeco’s owners were none too happy about being pressured in such a public way.
Cogeco’s controlling shareholder actually rejected the overture before lunch. “The non-binding proposal of Altice USA and Rogers Communications, which was pre-emptively announced today by Altice and Rogers, has been reviewed by Gestion Audem Inc., a company controlled by the members of the Audet family holding 69% of all voting rights of CGO which in turn controls 82.9% of all voting rights of CCA. Gestion Audem Inc. has already indicated that it does not intend to sell its shares and will not support the proposal,” reads its release.
The Cogeco morning release did say the company’s board of directors will look at it and before dinnertime, the board rejected it, the company said in another release.
“No way will we allow this Quebec company move its headquarters in Ontario.” – Francois Legault, Quebec premier
The Audet family holding company also issued yet another statement, which seems to say the company is not for sale, even if a higher offer is put forward, which is possible (it’s also worth noting that getting Cogeco’s Canadian operations for the terms in the agreement would have been a very good deal for Rogers, analysts told us).
“Members of the Audet family unanimously reiterated that they are not interested in selling their shares. The family takes pride in its stewardship role in both companies, offering high-quality services to its customers, enriching the communities in which they operate and creating superior returns for shareholders through sound growth strategies,” add Louis Audet, president of Gestion Audem, in his press release.
The Altice offer included a large premium on the controlling shares, which would have seen the Audet family paid $800 million.
The offer included $106.53 per share for the remaining CGO and $134.22 per share for each CCA subordinate voting share. These offer prices represented a premium of 30% to each stock’s one-month volume weighted average price on the Toronto Stock Exchange, reads the Altice release.
“We greatly respect and appreciate the legacy the Audet family has created with Cogeco, building an iconic company across Canada and the U.S. that is driven by superior customer service and continuous investments in technology,” said Dexter Goei, CEO of Altice USA in its press release.
Cartt.ca asked Altice, after the controlling shareholder’s rejection, if it would now increase its offer. “We believe our offer is very attractive and in the best interest of all shareholders, and we look forward to hearing from the board,” said a company spokesperson in an email Wednesday afternoon. Of course, the board has now already rejected it.
The Quebec government also made its feelings clear about the proposal on Wednesday morning. Unsurprisingly, Quebec premier Francois Legault was unhappy about it and said so in an appearance on Cogeco’s radio station FM 93. “No way will we allow this Quebec company move its headquarters in Ontario,” he said in French, translated by Cartt.ca’s Denis Carmel.
It’s unclear what levers the provincial government would be able to pull to prevent that from happening, should there be a renewed purchase offer, but provincial pension plan CDPQ came to own a portion of Atlantic Broadband when it helped Cogeco purchase Metrocast in 2017.
It is not believed CDPQ has any veto power over a sale agreement (in the same way it had one when Rogers tried to purchase Videotron in 2000) and we asked CDPQ for clarification and if it held such a veto, but a spokesperson said it would not comment.
“Under the stewardship of Mr. Audet, the Audet family, and the 4,500 Cogeco team members, Cogeco has built an iconic company in Canada and the United States. This meaningful offer reflects the tremendous accomplishments of the Audet family and Cogeco’s employees. 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,” added Rogers president and CEO Joe Natale, in the Rogers release.
