MONTRÉAL and QUINCY, Mass.,
June 30, 2021 /PRNewswire/ - Today
Cogeco Communications Inc. (TSX: CCA) announced that its
subsidiary, Atlantic Broadband, has entered into a
definitive agreement with WideOpenWest, Inc. (WOW) to
purchase all of its broadband systems located in Ohio ("the Ohio broadband systems").
The WOW Ohio broadband systems pass approximately 688,000 homes
and businesses in Cleveland and
Columbus and serve approximately
196,000 Internet, 61,000 video and 35,000 telephony customers, as
of March 31, 2021. For the twelve
months ended March 31, 2021, revenue
was US$244 million and pro forma
adjusted EBITDA, including adjustments to reflect the expected cost
structure of Atlantic Broadband and run-rate synergies, would have
been US$103 million.
"The acquisition of WOW's Ohio
broadband systems allows us to add significant scale to our growing
and profitable U.S. broadband business," said Philippe Jetté,
President and Chief Executive Officer of Cogeco Communications
Inc., the parent company of Atlantic Broadband. "The
acquisition also represents a strong strategic fit for Cogeco
Communications as it is complementary to Atlantic Broadband's
existing footprint and capitalizes on its existing platform. Under
the guidance of Atlantic Broadband's experienced management team,
we are in a unique position to grow our customer base, revenues and
earnings, and to pursue our market expansion strategy."
"We are taking a major step in advancing Atlantic Broadband's
high-growth strategy by expanding our reach beyond the east coast
footprint with attractive markets, that will be strongly receptive
to our customer-centric focus, superfast Internet, best-in-class
managed WiFi and advanced video services," said Atlantic Broadband
President, Frank van der Post. "The
Ohio broadband systems' geographic
fit with our Pennsylvania
operations, combined with our success in winning customer share in
competitive markets and our experience integrating acquired
properties, will ensure operational efficiencies, a seamless
transition for customers, and strong growth in these markets. To
support us in our future growth plans, we look forward to welcoming
our new colleagues located in Ohio
into the Atlantic Broadband family."
Atlantic Broadband has entered into a Transition Service
Agreement which will ensure a smooth transition period and allow
Atlantic Broadband to further upgrade the network and launch its
products and services, including a state-of-the-art IPTV
platform.
The acquisition has significant strategic benefits
including:
- Adds scale to Cogeco Communications' U.S. broadband services
segment which continues to exhibit superior growth and is expected
to keep generating strong operating margins. Atlantic Broadband's
Internet service customers will increase by 38 percent from
approximately 511,000 to 707,000 pro forma the acquisition. With
this acquisition, more than half of Cogeco Communications' revenue
will be generated by the U.S. business.
- Expands Atlantic Broadband's geographical footprint in markets
with very attractive demographic profiles and economies.
- Leverages Atlantic Broadband's product and sales expertise to
increase the customer base and deliver superior growth.
- Network footprint reaches a sizable portion of the Columbus and Cleveland markets, making it easier to operate
and to market products.
- Quality network, with 100 percent of homes passed served by a
DOCSIS 3.1 platform with speeds of 1 Gbps offered in the entire
footprint.
The Ohio broadband systems will
be purchased for US$1.125 billion. In
conjunction with the transaction, Atlantic Broadband expects to
realize tax benefits with a present value of approximately
US$140 million. These benefits are
mostly due to the tax amortization of intangible assets in an asset
purchase transaction where such intangible assets are stepped up to
current market value. Post the Transition Service Agreement period,
Atlantic Broadband expects to achieve run-rate annual synergies of
US$2 million. After adjusting for
these tax benefits and synergies, the purchase price represents a
multiple of approximately 9.6x pro forma adjusted EBITDA for the
twelve month period ended March 31,
2021. The purchase price is subject to customary closing
adjustments.
The purchase price and transaction costs will be financed
through a US$900 million committed
secured debt financing at the Atlantic Broadband level, and excess
cash on hand. The transaction is subject to regulatory approvals
along with other customary closing conditions and is expected to
close in the first quarter of fiscal 2022.
Advisors
Credit Suisse is acting as exclusive financial advisor to Cogeco
Communications Inc. Credit Suisse and Wells Fargo are providing the
committed debt financing for the transaction. Morgan, Lewis &
Bockius LLP is acting as legal advisor on the acquisition to Cogeco
Communications and Kirkland & Ellis LLP is acting as legal
advisor on the financing.
ABOUT ATLANTIC BROADBAND
Atlantic Broadband, a
subsidiary of Cogeco Communications Inc. (TSX: CCA), is the
eighth-largest cable operator in the
United States, based on the number of high-speed Internet
service customers served. The company provides its residential and
business customers with Internet, video and telephony services in
11 states: Connecticut,
Delaware, Florida, Maine, Maryland, New
Hampshire, New York,
Pennsylvania, South Carolina, Virginia and West
Virginia. Atlantic Broadband is headquartered in
Quincy, Massachusetts. To learn
more about Atlantic Broadband, please visit www.atlanticbb.com.
ABOUT COGECO COMMUNICATIONS INC.
Cogeco
Communications Inc. is a communications corporation. It is the
eighth-largest cable operator in North
America, operating in Canada under the Cogeco Connexion name in
Québec and Ontario, and along the
East Coast of the United States
under the Atlantic Broadband brand (in 11 states from Maine to Florida). The Corporation provides residential
and business customers with Internet, video and telephony services
through its two-way broadband fibre networks. Cogeco Communications
Inc.'s subordinate voting shares are listed on the Toronto Stock
Exchange (TSX: CCA).
ANALYST CONFERENCE CALL: Wednesday, June 30, 2021 at 10 a.m. (Eastern
Daylight Time)
A live audio webcast with a presentation will be
available on Cogeco's web site at
https://corpo.cogeco.com/cca/en/investors/investor-relations/. The
webcast will be available on Cogeco's website for a three-month
period. Members of the financial community will be able to access
the conference call and ask questions. Media representatives may
attend as listeners only.
Financial analysts, or participants who prefer to join
through a phone line, can use the following dial-in number
to have access to the conference call by dialing 5 to 10 minutes
before the start of the conference. You must join the conference
by phone in order to ask questions.
Canada/USA Access Number: (877)
291-4570
International Access Number: (647) 788-4919
IMPORTANT NOTE: In order to join this conference, participants
are only required to provide the operator with the company name,
that is, Cogeco Communications Inc. No confirmation code is
required.
NON-IFRS MEASURES
Financial information related to
the Ohio broadband systems is
based on accounting principles generally accepted in the United States ("US GAAP") which differ
from International Financial Reporting Standards ("IFRS") used to
prepare Cogeco Communications' consolidated financial statements.
Cogeco Communications has presented in this press release a
multiple of tax adjusted purchase price based on the pro forma
adjusted EBITDA of the business being acquired for twelve months
ended March 31, 2021. Adjusted EBITDA
is a financial measure that does not have a standard definition
prescribed by either US GAAP or IFRS and, therefore, may not be
comparable to similar measures presented by other companies.
Adjusted EBITDA represents profit for the year before income taxes,
financial expense, depreciation and amortization, adjusted to
exclude integration, restructuring and acquisition costs, which are
non-recurring items. Adjusted EBITDA is a key measure to
value a company and its financial strength. Cogeco Communications'
estimation of the pro forma adjusted EBITDA of the business being
acquired for the twelve months ended March
31, 2021 is based on financial information that was provided
by the current management of WOW and was adjusted to reflect the
expected cost structure of Atlantic Broadband and run-rate
synergies estimated at US$2 million
which are expected to be fully realized when the business is fully
stabilized post the Transition Service Agreement. Cogeco
Communications has not provided a quantitative reconciliation of
the non-IFRS or non-US GAAP financial measures included in this
press release to the most comparable financial measures presented
in accordance with IFRS due to the forward looking nature of the
financial information being presented. For more details, please
consult the Non-IFRS financial measures section of Cogeco
Communications' Management Discussion & Analysis (''MD&A'')
for the second quarter of fiscal 2021.
FORWARD-LOOKING STATEMENTS
Certain statements in
this press release may constitute forward-looking information
within the meaning of securities laws. Forward-looking information
may relate to Cogeco Communications, Atlantic Broadband and the
Ohio broadband systems' future
outlook and anticipated events, business, operations, financial
performance, financial condition or results and, in some cases, can
be identified by terminology such as "may"; "will"; "should";
"expect"; "plan"; "anticipate"; "believe"; "intend"; "estimate";
"predict"; "potential"; "continue"; "foresee", "ensure" or other
similar expressions concerning matters that are not historical
facts. In particular, statements regarding Cogeco Communications,
Atlantic Broadband and the Ohio
broadband systems' future operating results and economic
performance, the estimated tax benefits of the acquisition of
assets rather than shares, the expected revenue and pro forma
adjusted EBITDA of the business being acquired for the twelve
months ended March 31, 2021, the
expected timing of closing of the Transaction and its objectives
and strategies are forward-looking statements. These statements are
based on certain factors and assumptions including expected growth,
results of operations, purchase price allocation, tax rates,
weighted average cost of capital, performance and business
prospects and opportunities, which Cogeco Communications and
Atlantic Broadband believe are reasonable as of the current date.
While management considers these assumptions to be reasonable based
on information currently available to Cogeco Communications, they
may prove to be incorrect. Forward-looking information is also
subject to certain factors, including risks and uncertainties that
could cause actual results to differ materially from what Cogeco
Communications currently expects. These factors include risks such
as competitive risks, business risks (including potential
disruption to our supply chain), regulatory risks, public health
crisis and emergencies such as the current COVID-19 pandemic,
technology risks (including cybersecurity risk), financial risks
(including variations in currency and interest rates), economic
conditions, human-caused and natural threats to our network,
infrastructure and systems, community acceptance risks, ethical
behavior risks, ownership risks and litigation risks, many of which
are beyond Cogeco Communications' control. Therefore, future events
and results may vary significantly from what management currently
foresees. For more exhaustive information on these risks and
uncertainties, the reader should refer to the "Uncertainties and
Main Risk Factors" sections of Cogeco Communications' 2020 annual
MD&A and of the second quarter of fiscal 2021 MD&A. In
addition, Cogeco Communications' and WideOpenWest's ability to
close the transaction within the expected timeframe, if at all, is
dependent upon the parties' ability to comply with the closing
conditions, some of which are beyond the control of the parties.
The reader should not place undue importance on forward-looking
information and should not rely upon this information as of any
other date. While management may elect to, Cogeco Communications is
under no obligation and does not undertake to update or alter this
information at any particular time, except as may be required by
law.
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