Consolidation among U.S. cable operators continues, as Cogeco Communications Inc. (TSX:CCA) says its Atlantic Broadband subsidiary has agreed to buy all of the cable systems operating under the MetroCast brand from Harron Communications, L.P. Cogeco/Atlantic Broadband will pay $1.4 billion for the assets, which will come via a combination of committed secured debt from two banks and a $315 million equity investment by Caisse de dépôt et placement du Québec (CDPQ). CDPQ will own a 21% interest in Atlantic Broadband's holding company after the transaction closes, a milestone Cogeco expects to reach in January 2018.
MetroCast operates networks in New Hampshire, Maine, Pennsylvania, Maryland, and Virginia. It currently serves approximately 120,000 Internet, 76,000 video and 37,000 telephony customers; its networks pass nearly 236,000 homes and businesses, Cogeco estimates. The cable operator employs both fiber to the home (FTTH; see, for example, "MetroCast chooses Motorola's RF over glass for FTTH") and DOCSIS-based hybrid/fiber coax (HFC) infrastructure.
As Lightwave sister site Broadband Technology Report highlights, Cogeco/Atlantic Broadband had acquired MetroCast's networks in Connecticut almost two years ago, so the company already has experience with integrating such assets. Cogeco says that the MetroCast networks that compose the pending acquisition are expected to generate $230 million and adjusted EBITDA of $121 million this calendar year. Atlantic Broadband also expects to realize tax benefits with a present value of approximately $310 million.
"The acquisition of the MetroCast cable systems allows Atlantic Broadband to increase its presence in the growing and lucrative U.S. cable market," said Louis Audet, president and CEO of Cogeco. "The MetroCast systems are a strong strategic fit for Atlantic Broadband. With this acquisition, we are increasing our customer base in attractive markets adjacent to the ones we currently serve. Under the guidance of Atlantic Broadband's best-in-class management team, we are in a unique position to grow our customer base, revenues and profits."
It appears Audet has visions of additional expansion. "We are delighted to be partnering with CDPQ in this transaction, providing us with a long-term partner with a similar vision," he said. "The partnership will enable us to pursue our growth objectives in the U.S. cable market in the future. CDPQ's investment also highlights the value of these assets and our U.S. business, as well as the growth opportunity embedded in these businesses."
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