Cogeco to expand in Eastern U.S. with US$1.4 billion MetroCast purchase

Cogeco to expand in Eastern U.S. with US$1.4 billion MetroCast purchase

MONTREAL — Cogeco Communications Inc. (TSX:CCA) is preparing to expand in the Eastern United States by purchasing the MetroCast cable systems business in a deal valued at US$1.4 billion.

The Montreal-based company will make the acquisition through its Atlantic Broadband subsidiary, which has a definitive purchase agreement with Harron Communications LP, a family business.

Cogeco says the Caisse de depot pension fund will provide US$315 million towards the deal, in return for a 21 per cent equity stake in Atlantic Broadband’s holding company.

Two banks will also provide secured debt financing to Atlantic Broadband.

Cogeco says MetroCast is a good strategic fit for Atlantic Broadband, as both have TV, internet and phone customers in several U.S. Eastern states. It had previously acquired MetroCast’s network in Connecticut for US$200 million in 2015.

In addition, Cogeco expects Atlantic Broadband will benefit from about US$310 million of tax benefits from the deal.

Analyst Drew McReynolds of RBC Dominion Securities said he views the transaction as “neutral” because the premium paid for MetroCast will be offset by growth, operational savings and the Caisse’s investment.

“Strategically, the transaction fits with the company’s long-stated strategy of U.S. cable expansion via tuck-in acquisitions and thus is in line with our expectations,” McReynolds said in a note for clients.

The deal is subject to regulatory approvals and other customary closing conditions.

The Canadian Press
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