Cogeco to pay $1.36 billion for Atlantic Broadband; shares dive
By Alastair Sharp and Euan Rocha
TORONTO (Reuters) - Cogeco Cable Inc, a Canadian company that serves mostly rural customers in Ontario and Quebec, said on Wednesday it will pay $1.36 billion to buy U.S. cable operator Atlantic Broadband in a move aimed at gaining a foothold in the larger U.S. market.
The proposed deal, however, quickly triggered a 15 percent decline in Cogeco's share price, with investors skeptical of Cogeco's success in foreign deals following an unsuccessful foray into Europe.
In February, Cogeco sold its struggling Portuguese cable unit, Cabovisao, at roughly one-tenth the price it paid for it in 2006. Cogeco was unable to weather a harsh pricing war and the broader economic malaise in the country.
Montreal-based Cogeco, which provides cable-TV, high-speed Internet and telephone services, said the Atlantic Broadband acquisition will give it sizable opportunities for growth.
Atlantic Broadband is owned by private equity firms ABRY Partners and Oak Hill Capital Partners and has operations that service about 250,000 customers in Pennsylvania, Maryland, Florida, Delaware and South Carolina.
"This acquisition marks an attractive entry point into the U.S. market for Cogeco Cable," said Chief Executive Louis Audet.
Analysts, though, sounded dubious on a hastily arranged conference call in which Audet and other executives had to fend off tough questions about the price being offered, Cogeco's ability to succeed outside its home market, and Atlantic Broadband's growth prospects.
RBC Capital Markets analyst Drew McReynolds warned that the deal results in "increased execution risk" for Cogeco and could force the company to take its eye off the ball in Canada. Continued...