French Canadian operator Cogeco Cable has agreed to buy “substantially all” of the assets of MetroCast Connecticut for US$200m as part of US expansion plans. The purchase will be made via its subsidiary Atlantic Broadband – the 13th largest US…
French Canadian operator Cogeco Cable has agreed to buy “substantially all” of the assets of MetroCast Connecticut for US$200m as part of US expansion plans.
The purchase will be made via its subsidiary Atlantic Broadband – the 13th largest US cable operator in terms of TV subscribers.
The tax-adjusted purchase price represents a multiple of about 7.9x its expected adjusted EBITDA of US$21m for 2015, Toronto-listed Cogeco said in a statement. The target’s revenues for 2015 are expected to total US$45m.
Drew McReynolds, an analyst with RBC Capital Markets, described this as a “reasonable” transaction multiple in light of other recent sector deals.
He noted that it compares with a forward multiple of 8.8x for Cogeco’s acquisition of Atlantic Broadband and 8.3x, adjusted for synergies and tax benefits, for Charter’s planned purchase of Time Warner Cable.
MetroCast Connecticut’s network passes nearly 70,000 homes and businesses in the east of the state. It has about 53,000 customers in total: 23,000 for TV, 22,000 for internet and 8,000 for phone services.
Cogeco president and CEO Louis Audet commented: “We have been pleased with the results of our Atlantic Broadband acquisition and we are excited to continue our geographic expansion in the US market. This transaction enhances our growth profile through the planned launch of new residential services such as TiVo and Metro Ethernet for businesses.”
Atlantic Broadband president and CEO Richard Shea said Metrocast Connecticut’s well-maintained networks and eastern Connecticut’s “strong demographics” present “sizeable” residential and business growth opportunities.
Cableco plans to finance the deal, which is subject to regulatory approvals, with non-recourse debt to be issued by Atlantic Broadband. The company expects the transaction to close in Q3 this year.
RBC Capital Markets acted as financial adviser to MetroCast Connecticut.
McReynolds noted that the acquisition aligns with Cogeco’s well-publicised ‘tuck-in’ growth strategy in the US.
“Since the acquisition of Atlantic Broadband in 2012, management has consistently indicated an intention to make additional tuck-in acquisitions in US cable,” he said, noting that these take priority over additional data hosting purchases.
Cogeco already has about 1.94m revenue generating units (RGUs) in the Canadian Cable sector and Atlantic Broadband has about 507 RGUs.
