Cogeco Communications Inc. announces that Atlantic Broadband will acquire all of the Metrocast cable systems

unknown

Today Cogeco Communications Inc. (TSX: CCA) announced that its subsidiary, Atlantic Broadband has entered into a definitive agreement with Harron Communications, L.P. to purchase all of its cable systems operating under the MetroCast brand name (“MetroCast”). Cogeco Communications will finance this acquisition through its Atlantic Broadband subsidiary with a combination of committed secured debt and an equity investment by Caisse de dépôt et placement du Québec (“CDPQ”). MetroCast’s networks pass close to 236,000 homes and businesses in New Hampshire, Maine, Pennsylvania, Maryland and Virginia and serve approximately 120,000 Internet, 76,000 video and 37,000 telephony customers. Calendar 2017 revenue is expected to be US$230 million and Adjusted EBITDA is projected to be US$121 million. false false false Acquisition Rationale Adds scale in the American Broadband services segment which continues to exhibit steady growth and is expected to keep generating strong operating margins. Atlantic Broadband’s Primary Service Units (PSU) will increase from approximately 602,000 to 835,000 pro forma the acquisition. MetroCast’s systems are largely located in non-metropolitan markets with very attractive demographic profiles and market dynamics. Opportunity to leverage Atlantic Broadband’s product and sales expertise to quickly increase the customer base and deliver superior growth. High quality, fully digital network, comprised of 860 MHz or fiber to the home in 95% of the network, and providing 150 Mbps Internet service across its footprint. Minimal execution risk due to management's prior successful experience integrating MetroCast's Connecticut system, and the common service delivery and back office platforms. Further establishes Atlantic Broadband as a strategic platform in the U.S. with a diversified geographical footprint from Maine to Florida. Valuation Highlights and Acquisition Financing Substantially all of the assets of MetroCast will be purchased for US$1.4 billion. In conjunction with the transaction, Atlantic Broadband expects to realize tax benefits with a present value of approximately US$310 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. After adjusting for these tax benefits, the purchase price represents a multiple of approximately 9.0x Calendar 2017 expected Adjusted EBITDA for the business being acquired. The purchase price is subject to customary closing adjustments. The acquisition financing structure preserves Cogeco Communications Inc.’s strong financial position. CDPQ has committed a US$315 million equity investment for a 21% interest in Atlantic Broadband’s holding company, while the remaining balance of the purchase price and transaction costs will be financed through a committed secured debt financing at Atlantic Broadband, which is non-recourse to Cogeco Communications Inc. CDPQ’s equity interest represents an implied multiple of approximately 8.8x Calendar 2017 expected Adjusted EBITDA of Atlantic Broadband pro forma for the acquisition of MetroCast, and adjusted for the present value of various tax benefits estimated at approximately US$420 million related to the tax amortization of the intangible assets acquired and the current tax losses carried forward at Atlantic Broadband. The transaction is subject to regulatory approvals along with other customary closing conditions and is expected to close in January 2018. Advisors Credit Suisse is acting as exclusive financial advisor to Cogeco Communications Inc. Credit Suisse and BofA Merrill Lynch are providing the committed debt financing for the transaction. Stikeman Elliott S.E.N.C.R.L., s.r.l. and Kirkland & Ellis LLP are acting as legal advisors to Cogeco Communications Inc. Morgan, Lewis & Bockius LLP is acting as legal advisor to Harron Communications, L.P. CIBC Capital Markets and Osler, Hoskin & Harcourt LLP are acting as advisors to CDPQ. false false false ABOUT ATLANTIC BROADBAND Atlantic Broadband, a wholly-owned subsidiary of Cogeco Communications Inc., is the 9th largest cable operator in the United States, based on the number of television service customers served. The company currently provides video, Internet and telephony services to approximately 239,000 television service customers located in five operating regions: western Pennsylvania, Miami Beach, Maryland/Delaware, Aiken, S.C. and eastern Connecticut. Atlantic Broadband is headquartered in Quincy, Massachusetts. Additional information is available at www.atlanticbb.com. ABOUT COGECO COMMUNICATIONS INC. Cogeco Communications Inc. is a communications corporation. It is the 8th largest cable operator in North America, operating in Canada under the Cogeco Connexion name in Québec and Ontario, and in the United States under the Atlantic Broadband name. Cogeco Communications Inc. provides its residential and business customers with video, Internet and telephony services through its two-way broadband fibre networks. Through its subsidiary Cogeco Peer 1, Cogeco Communications Inc. provides its business customers with a suite of information technology services (colocation, network connectivity, hosting, cloud and managed services), through its 16 data centres, extensive FastFiber Network® and more than 50 points of presence in North America and Europe. Cogeco Communications Inc.’s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CCA). ABOUT CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC Caisse de dépôt et placement du Québec (CDPQ) is a long-term institutional investor that manages funds primarily for public and parapublic pension and insurance plans. As at December 31, 2016, it held $270.7 billion in net assets. As one of Canada's leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt. For more information, visit cdpq.com, follow us on Twitter @LaCDPQ or consult our Facebook or LinkedIn pages.