MONTREAL – As has been rumored since last summer, Cogeco Cable has agreed to buy Portuguese cable company Cabovisao-Televisao por Cabo S.A.
Cabovisao is owned by Cable Satisfaction International Inc. (CSII), Catalyst Fund Limited Partnership I.
CSII has been in bankruptcy protection and looking for a buyer for the cable company it built since 2003.
The 464.9 million Euro (C$658 million) purchase price includes all the shares of the second largest cable operator in Portugal as well as the purchase of senior debt and reimbursement of certain other liabilities of Cabovisao. The agreed-upon purchase price for the shares and senior debt corresponds to a multiple of 10.6 of operating income before amortization for the first quarter ended March 31, 2006 (annualized) and a multiple of 12.6 of operating income before amortization over the last 12 months ended March 31, 2006.
The final purchase price will be determined following completion of a post-closing working capital adjustment. This acquisition is in accordance with the external growth strategy announced by Cogeco Cable last October, said the company.
The purchase of Cabovisao is part of Cogeco’s European expansion plans, which has been covered by cartt.ca throughout 2005 and 2006.
The Canadian financial community may be tough to convince the foray across the pond is a good idea for the fourth-largest Canadian cable company. When cartt.ca first reported on the possibility of this deal in September, one Toronto financial analyst who covers the cable and media space said, “The market will hate this deal if it’s true and punish (Cogeco) if they go through with it.”
"Cabovisao is well positioned in the high-growth cable telecommunications market in Portugal, including the Aveiro, the Lisboa-Palmela, the Caldas and the Alentejo regions," explained Cogeco president and CEO Louis Audet, in this morning’s press release. "Cogeco Cable is pleased with its growth potential and expects to make attractive additions to the services already provided to its customers thanks to its modern distribution infrastructure. In addition, Cogeco Cable will share with Cabovisao its knowledge of the cable distribution industry which it has developed over the last 35 years and which will also foster stability in the ownership and management of that company.
"Cogeco Cable believes that there will be continued growth in the dynamic telecommunications market in Portugal. This acquisition is consistent with Cogeco Cable’s pursuit of external growth opportunities in the past and enables the corporation to take part in the development of the cable telecommunications sector in Europe," Audet continued. "In the future, Cogeco Cable’s shareholders can expect management to use the same level of discipline and seriousness with which the corporation has secured growth and creation of value for its shareholders in the past."
The transaction is subject to usual conditions and to the obtaining of a further orders of the Superior Court of Québec as part of the implementation of a plan of arrangement and reorganization of CSII which has already been approved by the Court. A motion anticipated to be filed later today with the court for this purpose will be heard June 15, 2006. The implementation of this plan and the sale to Cogeco Cable will enable Cabovisao to refocus on its growth opportunities in the Portuguese market.
Cogeco will finance the acquisition of Cabovisao through an underwritten credit facility of $900 million over five years committed by Canadian Imperial Bank of Commerce. CIBC World Markets has acted as financial advisor in connection with the proposed transaction. The total debt ratio on Cogeco Cable’s consolidated EBITDA following the acquisition of Cabovisao will be 4.8 compared to 3.1 before this transaction.
Cabovisao is a recently built, modern cable system providing analog television, high-speed Internet (HSI) and telephony services to approximately 611,000 revenue-generating units and 820,000 homes passed in Portugal. Approximately 264,000 customers subscribe to Cabovisao’s analog television service,130,000 customers subscribe to HSI service and 217,000 subscribe to its telephony service.
Cabovisao’s distribution infrastructure is a hybrid fibre optic and two-way 750 MHz coaxial cable network, built recently over a 10 year period, meets the DOCSIS 1.1 standard and reaches approximately 20% of all Portuguese households.
The company’s operating revenue was (euro) 129.3 million for the fiscal year ended December 31, 2005. For first quarter 2006 ended March 31, 2006, revenue totalled (euro) 34.7 million, a 12.6% increase compared to the year-earlier period. Cabovisao’s EBITDA for its fiscal year ended December 2005, stood at (euro) 34.5 million and its annualized EBITDA for the first quarter ended March 31, 2006, was (euro) 43.9 million.
Surf back here for more on this story after Cogeco’s conference call with financial analysts at 2 p.m. today.
