Cogeco to expand in eastern U.S. with $1.4 billion US MetroCast purchase

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 Cogeco Communications inked the biggest acquirement in its 60-year history on Monday with a $1.4-billion deal to buy the MetroCast telegraph systems and expand its U.S. presence.

Cogeco CEO Louis Audet said he walks growth opportunities that are double what is available in Canada by increasing the compute of TV, internet and phone services to each customer.

The Montreal-based company order make the acquisition through its Atlantic Broadband subsidiary, which signed a ultimate purchase agreement with Harron Communications LP, a family business.

Call of the agreement, Cogeco said the Caisse de depot pension fund at ones desire provide $315 million US in return for a 21 per cent equity share in Atlantic Broadband’s holding company.

The deal, which follows Cogeco’s gain of MetroCast’s network in Connecticut for $200 million US in 2015, will distend Atlantic Broadband’s presence to a total of 11 states.

Audet maintained MetroCast is present in smaller communities where competition is fragmented and guys have higher average incomes than the U.S. average and are more conceivable to adopt technology than Atlantic Broadband customers and the U.S. overall.

«So there is gripping growth and that’s what among other things interested the Caisse de depot et emplacements which are joining us in this development of the American market,» he said in an audience.

Cogeco’s annual U.S. revenues are expected to increase by 33 per cent to $704 million US, while its consolidated gates will reach $2.5 billion Cdn.

Growth potential

Analyst Lugged McReynolds of RBC Dominion Securities said he views the transaction as «neutral» because the incitement paid for MetroCast will be offset by growth, operational savings and the Caisse’s investment.

«Strategically, the dealing fits with the company’s long-stated strategy of U.S. cable expansion via tuck-in acquirements and thus is in line with our expectations,» McReynolds said in a note for patients.

Analyst Maher Yaghi of Desjardins Capital Markets said there is capacity growth by increasing the penetration of services, as Cogeco has done in past apportions.

«Overall, we see this transaction as a good move to increase the size of the U.S. line assets by buying a business that has very little fibre-to-the-home game and with favourable demographics,» he wrote in a report.

Audet said the company wishes focus on reducing its debt over 18 months before looking for other purchase opportunities.

The deal is expected to close in January subject to regulatory oks.

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