Despite a rather pointed rebuff from Cogeco’s largest shareholder, Altice USA CEO Dexter Goei isn’t throwing in the towel just yet, saying at an industry conference that his company remains committed to its effort to purchase the Canadian telecom operator.
Altice USA launched a $7.8 billion bid to purchase Cogeco on Sept. 2. As part of that offer -- made in partnership with Rogers Communications -- Altice would purchase Cogeco’s Atlantic Broadband U.S. cable business, while Rogers would buy its Canadian operations for $4.2 billion. The offer -- C$106.53 per share -- represented a 36% premium to Cogeco’s stock price on Aug. 31.
Cogeco responded quickly, publicly stating on Sept. 2 that its board would evaluate the offer, but adding that its controlling shareholder -- the Audet family -- had not expressed any intention to sell. On Sept. 7, Cogeco executive chairman Louis Audet, also the top representative for the Audet family trust that holds its Cogeco interest, made it clear that the family did not intend to sell.
“I want to provide absolute clarity to stakeholders regarding our intentions in response to the recent unsolicited proposal to acquire Cogeco. Our stocks are not for sale,” Audet said in the statement. “And let me be clear, our refusal is not a negotiating position, it is final.”
At the virtual Bank of America Merrill Lynch 2020 Media, Communications & Entertainment Conference Wednesday, Goei didn’t seem ready to give up yet.
“We’re working,” Goei said. “This is a marathon not a sprint. We’re committed to trying to come to an end game. From our standpoint, that’s very simple, which is we’d like to be able to acquire the U.S. assets.”
He added that Rogers already owns a 33% interest in Cogeco Communications and 41% of Cogeco, which it has held for a “very, very long time.”
“They’d like to be able to sort out their situation, one way or the other,” Goei continued. “We are going to be committed to continuing this process and this project. We’ll see where it ends up.”
Goei wouldn’t say how that would happen or if Altice USA would raise its offer, but he did say that the deal would be a good fit, likening Atlantic Broadband to a smaller Suddenlink, the Midwestern operator the company purchased in 2015.
“That entire Florida to Maine footprint that they have is geographically pretty contiguous,” Goei said. “We like cable, we like traditional MVPDs, and size matters in our space -- for the technology investments, for the infrastructure investments, for the content costs, for all of the amortization of the operational costs of the business. It’s pretty straight forward in terms of the synergies. They’re in every single line item across the board.”
While Goei said the business will continue to do well without the deal -- Altice USA had its two best quarters of growth in Q1 and Q2 -- opportunities like Atlantic Broadband don’t come around often.
“The opportunity came to us as we got introduced to Rogers,” Goei said. “Rogers has a big focus on Canada and no interest in the U.S. and vice versa. It’s just a question of timing. ...It’s not a question in any shape or form of us needing to do anything in particular. It’s just that you need to be reactive in M&A situations and this was a perfect opportunity for us to be reactive.”
While the hope is that an agreement can be reached, Goei said if a deal does not materialize, life will go on.
“Plan A all the time to the extent there is attractive M&A is available, we’ll always prioritize that,” Goei said. “We will always be looking at stuff out there, and to the extent that we find a target that we find very attractive for whatever part of our business we are looking to grow, then we will use those proceeds for that. Assuming that doesn’t happen, because M&A is fraught with low probabilities of success depending on what the asset is and who the seller is and what the process is, we will look to buy back more shares and even maybe delever our balance sheet. It depends on the opportunity.”
