Having purchased MetroCast's networks in Connecticut in 2015, Cogeco Communications Inc. (TSX:CCA) subsidiary Atlantic Broadband has agreed to buy the rest of the brand's cable systems from parent Harron Communications, L.P. for $1.4 billion in cash. Cogeco says it will acquire the necessary funds 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% of Atlantic Broadband's holding company after the deal closes, which Cogeco expects to occur next January.
MetroCast serves approximately 120,000 Internet, 76,000 video and 37,000 telephony customers spread across New Hampshire, Maine, Pennsylvania, Maryland, and Virginia. It also offers business services. Cogeco says that the MetroCast networks 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 addition of MetroCast will raise Atlantic Broadband's primary service units from approximately 602,000 to 835,000. While MetroCast offers a 1-Gbps business service, it has not yet offered such speeds to its residential customers. Atlantic Broadband, meanwhile, has jumped on the residential gigabit bandwagon, including on MetroCast's former Connecticut footprint (see "Atlantic Broadband Goes Gigabit in CT").
"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."
Atlantic Broadband is the ninth largest cable MSO in the U.S. in terms of television service customers served. It provides triple-play services to approximately 239,000 TV service customers in five operating regions: western Pennsylvania, Miami Beach, Maryland/Delaware, Aiken, SC, and eastern Connecticut. Cogeco claims to be the eighthlargest cable operator in North America when its Atlantic Broadband and Canadian Cogeco Connexion operations in Quebec and Ontario are combined.
Audet appears to have his eye on additional expansion opportunities. "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."
