Audet family declines Altice USA, Rogers offer to buy Cogeco

The controlling shareholder of Cogeco Inc. — the Audet family — has said no to an acquisition bid from a U.S. company that would have seen Rogers Communications Inc. take over Cogeco’s Canadian assets for $4.9 billion. The deal is part of an offer, announced Wednesday morning, by New York-based Altice USA Inc. to buy all of Cogeco — both its U.S. and Canadian operations -- for $10.3 billion. Rogers would then purchase the Canadian assets from Altice. Altice said in a press release Wednesday that as the controlling shareholder, the Audet family -- including former CEO and current executive chairman Louis Audet -- would need to approve the deal. The release added that “as such the Altice USA offer includes a sizeable premium on those shares.” But in a press release later in the morning Wednesday, Cogeco said the deal “was pre-emptively announced today by Altice and Rogers,” and that Gestion Audem Inc., the company controlled by the members of the Audet family, “has already indicated that it does not intend to sell its shares and will not support the proposal.” The deal was also rejected by the company's boards of directors, Cogeco said in a Wednesday evening press release. Montreal-based Cogeco appears to have been under political pressure to say no to the bid from Toronto-headquartered Rogers. Quebec premier François Legault was asked about the offer in a radio interview on a Cogeco station Wednesday morning. He responded, in French: “There is no question of letting this Quebec company move its headquarters to Ontario.” Legault added: “We talked to Louis Audet this morning -- we talk regularly -- and told him we will do everything we can to keep the headquarters here.” Still, Wednesday morning’s events may just be “round one,” according to National Bank analyst Adam Shine. “It now remains to be seen if Altice and Rogers will gain traction with their gambit, that may prove just an opening foray that might require further discussions around price and structure given that the Audet Family may not necessarily wish to receive proceeds entirely in cash,” Shine said in a research note. “Of course, it's entirely possible that the Audet Family simply opts not to be a seller at this time.” Under the proposal, Louis Audet and other members of the Audet family would receive $800 million for their controlling ownership interests as part of the deal. The deal would give Rogers a wireline presence outside the major cities in Quebec and Ontario, as well as an additional 23 radio stations. In its last quarterly, Cogeco reported revenues of $626 million, $97.5 million in profit and 1.8 million Canadian subscribers — 803,073 Internet customers and 627,608 TV subscribers. Shine said in his note that there are a few factors that make it a good time to bid for the company. Cogeco’s share prices, like those of other telecom companies, were affected by the COVID-19 pandemic, which means Rogers and Altice have room to increase their bid price. Additionally, the CRTC, which is in the middle of deciding whether to mandate access to incumbent networks by mobile virtual network operators (MVNOs), could also opt for Cogeco’s “hybrid” proposal as a compromise. The company, which has long considered but never pulled the trigger on entering the wireless market, suggested to the CRTC that mandated access only be available to companies who already have broadband facilities and continue to invest in their own infrastructure. “We simply note this as something evolving in the background rather than to suggest that Rogers is eliminating Cogeco from the wireless equation,” Shine said. He added that “Rogers has been a long-term investor in Cogeco and may have finally found a way to acquire the latter's Canadian assets and pursue its next consolidation move with significant cost savings and future revenue synergies.” Canaccord Genuity analyst Aravinda Galappatthige said in his note that Cogeco’s Ontario footprint would fit in well with Rogers’ existing wireline network in the province. If the deal goes through, the threat of a hybrid MVNO model will wane, he said. “The hybrid MVNO model largely relies on the existence of localized wireline companies with the infrastructure and balance sheet to enter the wireless market and subsequently invest in their own networks. Naturally, Cogeco was the obvious choice for this, which could have increased the level of wireless competition in Ontario,” Galappatthige said. Before the Cogeco response, Altice USA CEO Dexter Goei said in his company’s release: “We greatly respect and appreciate the legacy the Audet family has created with Cogeco, building an iconic company across Canada and the U.S. that is driven by superior customer service and continuous investments in technology. We are pleased to present this very attractive offer for Cogeco, and are confident that Mr. Audet and the Cogeco boards will act in the best interest of all shareholders and fairly evaluate this offer.” In a statement also preceding Cogeco’s response, Rogers president and CEO Joe Natale said that under “the stewardship of Mr. Audet, the Audet family, and the 4,500 Cogeco team members, Cogeco has built an iconic company in Canada and the United States. This meaningful offer reflects the tremendous accomplishments of the Audet family and Cogeco’s employees.” — Reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Michael Lee-Murphy at mleemurphy@thewirereport.ca

Audet family declines Altice USA, Rogers offer to buy Cogeco

News | September 2, 2020

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Audet family declines Altice USA, Rogers offer to buy Cogeco

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