Atlantic Broadband appears to have made the first move in the non-Charter Communications cable consolidation wave, agreeing to purchase MetroCast of Connecticut from Harron Communications for $200 million.
Atlantic Broadband, itself owned by Canadian cable operator Cogeco, said the systems pass about 70,000 homes in nine communities in eastern Connecticut including New London, Waterford, East Lyme, Montville, Plainfield, Killingly, Sterling, Griswold, and Putnam and have 23,000 TV, 22,000 Internet and 8,000 phone customers.
MetroCast of Connecticut is one of six separate regions in the company -- New Hampshire, Maine, Pennsylvania, Maryland and Virginia are the others. The company has sold other regional operations in the past -- in 2014 Block Communications purchased MetroCast systems in Mississippi and Alabama.
“With eastern Connecticut’s strong demographics and MetroCast Connecticut’s well-maintained networks, this acquisition brings sizeable residential and business growth opportunities,” said Atlantic Broadband CEO, Richard Shea in a statement. “Our goal is to deliver the best TV, Internet and Phone services combined with responsive local support to the communities we serve. We look forward to welcoming MetroCast Connecticut’s customers and employees to Atlantic Broadband.”
Atlantic Broadband was purchased by Cogeco in 2012 for $1.4 billion and was expected to be a vehicle for the Canadian operator to consolidate smaller systems in the United States. Those plans were put on hold after Comcast announced its $67 billion merger with Time Warner Cable in February 2014, but apparently were restarted after Comcast terminated the deal and Charter agreed to purchase TWC for about $78.7 billion in stock, cash and assumed debt.
Atlantic Broadband, based in Quincy, Mass, has about 224,000 TV, phone and Internet subscribers in Western Pennsylvania, Southern Florida, Maryland/Delaware and South Carolina. In 2014, long-time CEO Ed Holleran stepped down from the company and was replaced by Cogeco executive Shea.Holleran formed ABB in 2003 with fellow former Continental Cablevision executive David Keefe.
Adjusted for taxes, the MetroCast deal is valued at about 7.9 times MetroCast’s estimated 2015 cash flow of about $21 million, putting it in the neighborhood of recent deals. The multiples rise sharply when looked at from a straight cash flow and revenue basis -- at $200 million, the deal is valued at 9.5 times 2015 cash flow and 4.4 times 2015 estimated revnue of $45 million. Cogeco expects the transaction to close during the third quarter of this year.
“We have been pleased with the results of our Atlantic Broadband acquisition and we are excited to continue our geographic expansion in the U.S. market,” said Cogeco Cable CEO Louis Audet in a statement. “This transaction enhances our growth profile through the planned launch of new residential services such as TiVo and Metro Ethernet for businesses.”
RBC Capital Markets served as the exclusive merger and acquisition advisor to MetroCast Connecticut in connection with this Transaction.
