Audet family would have received $900 million for controlling shares
NEW YORK and TORONTO – Altice USA announced Sunday evening it has presented a new, higher offer to purchase Cogeco Inc. and Cogeco Communications.
Then a bit later on Sunday evening, it was rejected by Cogeco’s controlling shareholder.
The new offer is for $11.1 billion, or $800 million more than the Altice/Rogers first pitch last month ($123/share for CGO and $150/share for CCA, a 57% premium over the shares’ prices as of August 1, notes the Altice release). What hasn’t changed is Altice’s desire to sell Cogeco’s Canadian assets to Rogers Communications, but the new deal calls for Rogers to pay $5.2 billion for Cogeco’s southern Quebec and Ontario networks and chain of Quebec radio stations. The original offer would have seen Rogers pay $300 million less for Cogeco’s Canadian assets.
Altice would retain Cogeco’s American networks, which are mostly under the Atlantic Broadband brand.
Since Rogers is a significant Cogeco shareholder and would of course benefit from selling its shares to Altice under this new offer “(a)s a result, the net consideration to be paid by Rogers for the Canadian assets of Cogeco reflects a gross price of $6 billion, less the premium on the shares currently held by Rogers of $800 million, less the value of Rogers’ shares excluding the premium of $1.5 billion, for net cash consideration of $3.7 billion. Rogers does not anticipate any need to issue equity as a result of this transaction and its current dividend is maintained,” reads the Altice release.
Gestion Audem, the Audet family holding company and Cogeco’s controlling shareholder, would get $900 million under the new deal’s terms, $100 million more than the initial offer.
A few hours after the Altice USA press release Sunday evening, however, Gestion Audem summarily rejected the new overture. “Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal. We are not interested in selling our shares,” said Louis Audet, president of Gestion Audem, in a release. Gestion Audem holds 69% of all voting rights of Cogeco Inc., which in turn controls 82.9% of all voting rights of Cogeco Communications.
That statement also noted Cogeco is the only broadband services company with a significant presence in both Canada and the United States and the stock prices and operating results of the Cogeco companies “far outperforms” Rogers or Altice.
“Rogers has freely chosen to accumulate shares in the Corporations with full knowledge of the implications,” added Audet in the release. “The Audet family regrets that Rogers’ capital allocation decision is causing the Rogers family and Board such anguish.”
Update: On Monday morning, the two Cogeco companies issued a release, noting “the revised and non-binding proposal will be submitted to and reviewed by the Corporations’ boards of directors,” that Gestion Audem had already rejected it, and that it would have no further comment.
As readers will recall, there has been a lot of back-and-forth between Altice/Rogers and Cogeco since the original purchase offer was announced in September and rejected almost immediately. Cogeco’s chairman Louis Audet, who is president of Gestion Audem, has repeatedly said the company is simply not for sale. Cogeco’s boards of directors also rejected the initial offer. The Quebec premier and other local politicians have weighed in against the deal and Rogers has pointed out how much it already has invested in Quebec, how much more it plans to invest and that it would maintain Cogeco’s headquarters in Montreal.
After each Altice or Rogers statement, Cogeco reiterated the company is just not for sale and fed up in late September, made public some of the correspondence between the companies saying Rogers and Altice had made “untrue statements and unsubstantiated allegations.” The pursuing companies had told Audet “the boards and their independent directors failed to fulfill their most basic duties in representing the shareholders they are duty bound to represent and protect.”
Despite all that, Altice and Rogers want this deal to happen (for at least one other good reason, too) and set a deadline for Cogeco to consider the new deal. “If Altice USA is unable to arrive at a mutually satisfactory agreement by November 18, 2020, or, at the very least, it does not see a clear path forward to completion of a transaction, this revised offer will be withdrawn,” reads the Altice USA Sunday night press release.
It would appear the Audet family did not need a month to decide.
“We are pleased to present an incredibly attractive revised and enhanced offer for Cogeco that significantly rewards all shareholders and incorporates feedback from recent discussions with holders of subordinate voting shares,” said Altice USA CEO Dexter Goei, in the release. “We encourage the Cogeco boards to act in the best interest of all shareholders and stakeholders as they thoughtfully consider this offer, and we respectfully request that the boards engage with us to discuss our proposal.”
The all-cash offer for all outstanding shares of CGO and CCA, including those owned by Rogers, also includes $900 million for the Audet family for their ownership interests, “which include 100% of the multiple voting shares of CGO and approximately 0.9% and 0.3% of the total outstanding CGO and CCA subordinate voting shares, respectively,” reads the release.
If the deal went forward, Altice and Rogers believe they would receive shareholder, corporate and regulatory approvals and close the deal within six to nine months after signing.
