HALIFAX – If you thought Bragg Communications, parent company of EastLink, was content with being the dominant cable operator in Nova Scotia and Prince Edward Island – not to mention a painful, persistent competitive thorn in Bell Aliant’s side, you’d be wrong.
On Friday, Bragg more than doubled its size by announcing it has signed a purchase agreement with Persona Communications. The combined company – when you add in its impending purchase of Amtelecom – will have close to half a million basic cable subscribers (260,000 from Persona added to EastLink’s approximate 230,000).
The agreement to purchase the shares of Persona is subject to regulatory approval, too, but expect that to be a slam dunk. The deal should close sometime in the late summer. Persona is currently held by a consortium of private equity funds including HM Capital Partners, Birch Hill Equity Partners and CIBC Capital Partners. CIBC World Markets Inc. served as financial advisor to Persona.
Terms of the deal were not disclosed, but a little guesswork likely places the value of Persona north of the $500 million mark. When Persona was taken private in 2004 (this sentence has been corrected to change an incorrect date and overall purchase price) by the current ownership consortium, it paid just over $404 million, approximately $1,900 per subscriber, for a company which then had around 210,000 subscribers. Persona then was just in the beginning stages of connecting systems with fibre and was in the early throes of digital cable.
Today’s Persona is a different company than the 2004 version. It has laid millions of dollars worth of additional fibre and has digital cable available to 75% of its customers. It has also launched telephony in Sudbury, Ont. As well, Persona has added thousands of subscribers with two main purchases, the 2005 pickup of Northern Cablevision of Grande Prairie, AB (25,000 subs), and purchase of Delta Cable of Delta B.C. (38,500).
Commission filings of Persona’s 2006 purchase of Delta Cable say that Persona got a $90 million loan to help buy the 38,500 customer cable company. While additional financing details such as equity put in by the Persona ownership are confidential and not in the CRTC documents the loan amount alone accounts for $2,300 per subscriber for Delta. Applying that number to Persona as a whole would make the company worth close to $600 million.
But again, this is speculation as both Persona and Bragg executives were steadfast in their refusal to discuss the terms of the deal when asked by Cartt.ca. So, it’s not known how much debt Persona has or how much cash out of pocket Bragg has to actually pay for the company.
This move will also mark the exit from the Canadian cable business by one of its dominant personalities, Persona president and CEO Dean MacDonald.
“I’m out,” MacDonald told Cartt.ca after the news broke on Friday. “That was the goal – come in, fix it up and sell it.” The CEO says Persona still has a number of projects to carry out, such as launching VOIP in Delta, but once the sale goes through, he plans some time off and can’t say yet what his future plans are. (Although with his friend, former Cable Atlantic owner Danny Williams, as premier Newfoundland & Labrador, we asked about politics, but MacDonald said he doesn’t know what he wants to do yet.)
The sale of Persona now is a little ahead of the original plan, said MacDonald, “probably because the industry is so hot right now and people are realizing that there’s a lot of lift in terms of telephony opportunity and so on – and I think we probably got a whole lot more done in a faster fashion than we thought.
“We poured a lot of capital into rebuilds,” he said.
The joke about Persona (formerly Regional Cablesystems and C1 and a couple of other iterations) was always that it had “200,000 customers and just as many headends.” While that wasn’t far off of the truth in the old days, fibre interconnects has meant the company has retired hundreds of tired old headends in the provinces it operates: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec and Newfoundland & Labrador.
While MacDonald and John Bragg, founder of Bragg Communications, “talk to each other on a fairly frequent basis on lots of stuff in terms of what’s happening in Atlantic Canada in terms of business and other things,” says MacDonald, he declined to say who approached whom about the sale first. He did add, however, that the deal “came together pretty quickly in the last few weeks.”
Bragg, of course, is a serial entrepreneur. While cable and telephony are big pieces of his businesses, Bragg’s Oxford Foods is the world’s largest blueberry producer. That company also produces other fruit and vegetables such as cranberries and carrots. Bragg is also in retail and recycling down east.
“I admire John Bragg so much in terms of his business acumen,” said MacDonald. “He’s a guy that just knows how to run businesses, he treats people extremely well, he’s a gentleman… he’s one smart guy.”
After having spent 25 years in the industry, mostly with Cable Atlantic, but also for a time as a Rogers Cable executive vice-president, MacDonald ranked his stint at Persona as his most challenging.
“It was the roughest… that’s for sure,” he said. “But I think in the last six months or so, the company really has hit its stride in terms of subscriber growth and the introduction of new products and the brand having resonance with our customers. You could feel it in the whole company around here.
“The last few months, it’s been great fun.”
Thanks to a successful dish buyback program, subscriber losses have stopped, too, “and we’re growing the business,” added MacDonald.
This deal should work out very well for Persona employees. Since there is no overlap in any regions, most will keep their jobs, a fact confirmed by EastLink co-CEO Dan McKeen who, when asked about layoffs, said “We don’t expect any of that.”
“This is a great opportunity for us to grow our business. We’re doubling in size and it’s a good company, well-run… We expect to continue to run it as Persona and we think that there will be good opportunities for us to bring some value and expansion into new products and services, particularly telephone,” continued McKeen.
EastLink has gained huge market share in local telephony in Nova Scotia and PEI and adding more territory in Newfoundland and Labrador makes the company more dangerous to Aliant. “If I was Aliant, I’m sure I’d have some sleepless nights because John is such a tough competitor,” added MacDonald.
“We are certainly people who believe in upgrading systems and providing telephone and the full broadband experience and that’s a strategy we’ll continue to adopt,” added McKeen.
With dozens of smaller cable companies that still remain in Canada, are there more acquisitions on the horizon for Bragg/EastLink? “I think this has satisfied our appetite for the near term,” said McKeen, adding the company will look at other opportunities as they present themselves.
