Cogeco expands U.S. business with Ohio acquisition

Cogeco Communications Inc. is expanding south of the border after it announced its American subsidiary will be purchasing all of the broadband systems, located in Ohio, owned by a U.S. cable operator. On Wednesday, Cogeco announced that its subsidiary Atlantic Broadband will be acquiring WideOpenWest, Inc. (WOW) for US$1.125 billion. Atlantic Broadband projects that its internet service customers will increase by 38 per cent from the acquisition and expects to realize tax benefits of approximately US$140 million. Cogeco Communications also expects that more than half its revenue will now be generated by business in the United States. "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 a press release. WOW currently serves approximately 196,000 internet, 61,000 video, and 35,000 telephony customers in Cleveland and Columbus, and its Ohio broadband systems pass approximately 688,000 homes. "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,” Jetté stated. From March 31 2020 to March 2021, WOW generated US$244 million in revenue, including adjustments to reflect the expected cost structure of Atlantic Broadband and run-rate synergies, which would have been US$103 million, according to the press release. Aravinda Galappatthige, analyst with Canaccord Genuity, said in a press release that the “acquisition has the potential to notably shift Cogeco’s investment thesis towards a more US cable leaning name, which naturally has positive valuation implications,” and will move Atlantic Broadband up to the eighth-largest cable provider in the United States. “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,” the Canaccord Genuity press release stated. Atlantic Broadband president, Frank van der Post, stated in the press release that the acquired broadband system, combined with its current operations in Pennsylvania, will grow the company’s customer share in competitive markets. “Our experience integrating acquired properties, will ensure operational efficiencies, a seamless transition for customers, and strong growth in these markets. To support us in our future growth plans, we look forward to welcoming our new colleagues located in Ohio into the Atlantic Broadband family," he said in the press release. Atlantic Broadband has entered into a Transition Service Agreement which will ensure a smooth transition period and allow Atlantic Broadband to further upgrade the network and launch its products and services, including a state-of-the-art IPTV platform, it said.

Cogeco expands U.S. business with Ohio acquisition

Brief | June 30, 2021

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Cogeco expands U.S. business with Ohio acquisition

Brief | June 30, 2021

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