MONTREAL and QUINCY, MA – Cogeco Communications subsidiary Atlantic Broadband is buying the MetroCast cable systems in the eastern United States for US$1.4 billion, the company announced early Monday.
MetroCast's networks pass close to 236,000 homes and businesses in New Hampshire, Maine, Pennsylvania, Maryland and Virginia and serve approximately 120,000 Internet, 76,000 video and 37,000 telephony customers.
Cogeco said that the Caisse de dépôt et placement du Québec pension fund will provide US$315 million in return for a 21% equity stake in Atlantic Broadband's holding company, while the remaining balance of the purchase price and transaction costs will be financed through a committed secured debt financing provided by two banks.
The deal, which follows Cogeco's acquisition of MetroCast's network in Connecticut in 2015 for US$200 million, will see Atlantic Broadband's primary service units (PSU) increase from approximately 602,000 to 835,000 pro forma the acquisition. Cogeco said that the deal further establishes Atlantic Broadband as “a strategic platform in the U.S. with a diversified geographical footprint from Maine to Florida”.
"The acquisition of the MetroCast cable systems allows Atlantic Broadband to increase its presence in the growing and lucrative U.S. cable market," said Cogeco Communications president and CEO Louis Audet (pictured earlier this year), in the news release. "The MetroCast systems are a strong strategic fit for Atlantic Broadband. With this acquisition, we are increasing our customer base in attractive markets adjacent to the ones we currently serve. Under the guidance of Atlantic Broadband's best-in-class management team, we are in a unique position to grow our customer base, revenues and profits."
Analyst Aravinda Galappatthige of Canaccord Genuity said that the acquisition is in-line with Cogeco’s strategic objective of pursuing cable acquisitions in the U.S. markets.
“We view the acquisition positively due to the fact that 1) Competitive conditions appear to be modest with little activity (Fibre roll out etc.) from the Telcos (FTTH/FTTN only 8% of footprint; 2) Attractive demographics with higher proportion of high tech adopters, greater demand for higher speeds etc.; 3) A high growth asset (management referred to 7% EBITDA growth); 4) A sizable and under-exploited opportunity in B2B; 5) The transaction with the Caisse potentially further highlights the underlying value of the US cable assets within (Cogeco).
The deal is expected to close in January 2018 and is subject to regulatory approvals along with other customary closing conditions.
Photo from Cogeco's annual shareholders’ meeting in January by Steve Faguy
