MONTREAL and QUINCY, Mass. – Cogeco Communications’ announced today its American subsidiary, Atlantic Broadband, has agreed to acquire WideOpenWest’s broadband systems located in Ohio for US$1.125 billion.
The WOW Ohio broadband systems pass approximately 688,000 homes and businesses in Cleveland and Columbus and serve approximately 196,000 Internet, 61,000 video and 35,000 telephony customers, as of March 31, 2021, reads the press release. For the twelve months ended March 31, 2021, the company’s revenue was US$244 million
“The acquisition of WOW’s Ohio broadband systems allows us to add significant scale to our growing and profitable U.S. broadband business,” said Philippe Jetté, president and CEO of Cogeco, in the release. “The acquisition also represents a strong strategic fit for Cogeco Communications as it is complementary to Atlantic Broadband’s existing footprint and capitalizes on its existing platform. Under the guidance of Atlantic Broadband’s experienced management team, we are in a unique position to grow our customer base, revenues and earnings, and to pursue our market expansion strategy.”
The merger will see Atlantic Broadband’s Internet service customers increase by 38 percent to approximately 707,000 after the acquisition. With this acquisition, more than half of Cogeco Communications’ revenue will now be generated by the U.S. business.
The purchase price and transaction costs will be financed through a US$900 million committed secured debt financing at the Atlantic Broadband level, and excess cash on hand, said the release. The transaction is subject to regulatory approvals along with other customary closing conditions and is expected to close in the first quarter of fiscal 2022.
At least one early Bay Street return is positive. “We believe that this acquisition has the potential to notably shift Cogeco’s investment thesis towards a more US cable leaning name, which naturally has positive valuation implications. With this transaction, US cable rises to ~48% of consolidated EBITDA from 42%,” said Canaccord Genuity analyst Aravinda Galappatthige in a note to investors.
“Furthermore, ABB moves up one rank to become the 8th largest US cable provider. Lastly, given that ABB’s leverage would be at 5x upon closing, thus requiring alternative financing for any significant future M&A, the prospect of a spin out of the US business also comes to the fore, which would be meaningfully accretive in our view.”
www.atlanticbb.com
www.cogeco.com
