Cogeco Communications Inc. (TSX: CCA) through Atlantic Broadband has agree to acquire from Harron Communications, L.P. all of its cable systems operating under the MetroCast brand name for US $1.4 billion.
Caisse de dépôt et placement du Québec (CDPQ) has committed a US $315 million equity investment for a 21% interest 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 at Atlantic Broadband, which is non-recourse to Cogeco Communications Inc.
CDPQ’s equity interest represents an implied multiple of approximately 8.8x Calendar 2017 expected Adjusted EBITDA of Atlantic Broadband pro forma for the acquisition of MetroCast, and adjusted for the present value of various tax benefits estimated at approximately US $420 million related to the tax amortization of the intangible assets acquired and the current tax losses carried forward at Atlantic Broadband.
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. Calendar 2017 revenue is expected to be US $230 million and Adjusted EBITDA is projected to be US $121 million.
“The acquisition of the MetroCast cable systems allows Atlantic Broadband to increase its presence in the growing and lucrative U.S. cable market,” said Louis Audet, President & CEO of Cogeco Communications. “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.”
“We are delighted to be partnering with CDPQ in this transaction, providing us with a long-term partner with a similar vision. The partnership will enable us to pursue our growth objectives in the U.S. cable market in the future. CDPQ’s investment also highlights the value of these assets and our U.S. business, as well as the growth opportunity embedded in these businesses,” added Audet.
“As a long-term investor, CDPQ seeks opportunities to invest in businesses that are resilient to economic cycles, are led by experienced teams and have the ability to sustain growth over time. Cogeco is a good example of this, and we look forward to investing by its side as it pursues its North American expansion,” said Christian Dubé, Executive Vice-President, Québec, at Caisse de dépôt et placement du Québec.
“After our highly successful acquisition and integration of the MetroCast Connecticut system almost two years ago, we understand first-hand the sizable residential and business growth potential that we can expect with the remaining MetroCast systems. We have a proven integration plan and a track record of successfully migrating our platforms and service offerings,” said Atlantic Broadband President and Chief Executive Officer, Richard Shea. “These well-maintained systems deliver attractive demographics which make them ideal for our suite of residential video, Internet and telephony services as well as our business services. We look forward to welcoming MetroCast customers and employees to Atlantic Broadband.”
Credit Suisse is acting as exclusive financial advisor to Cogeco Communications Inc. Credit Suisse and BofA Merrill Lynch are providing the committed debt financing for the transaction. Stikeman Elliott LLP and Kirkland & Ellis LLP are acting as legal advisors to Cogeco Communications Inc. Morgan, Lewis & Bockius LLP is acting as legal advisor to Harron Communications, L.P. CIBC Capital Markets and Osler, Hoskin & Harcourt LLP are acting as advisors to CDPQ.
photo credit: MetroCast