Canada’s fourth-largest cable company is preparing to make a move into the U.S. market with a US$1.36-billion deal to acquire Atlantic Broadband, a private company that operates in five eastern states stretching from Pennsylvania to Florida.
Montreal-based Cogeco Cable, which currently operates primarily in Ontario and Quebec, says it will buy Atlantic Broadband for a combination of cash on hand and money borrowed under existing financing agreements.
Atlantic Broadband is the 14th-largest cable television system operator in the United States, with systems in Pennsylvania, Florida, Maryland, Delaware and South Carolina.
The deal will be Cogeco’s entry into the United States – a market that has been difficult for Canadian cable companies to crack, even though they have generally been highly profitable operations at home.
Both Rogers and Shaw – now Canada’s two largest cable companies – made attempts at different times several years ago, but later withdrew.
“This is a wonderful way to enter the U.S. market,” Cogeco president and chief executive Louis Audet said in a conference call. “We can continue to enjoy industry leading growth on a technologically advanced network.”
Audet said the American market that Cogeco is entering is similar to the Canadian market and should provide future growth in the United States.
“It’s about establishing a healthy, promising base from which to grow in the United States.”
Cogeco Cable has also had troubles expanding beyond its home base, with an expansion into Europe through the purchase of a Portuguese company turning into a money-losing proposition. Cogeco sold its Portuguese unit earlier this year.
But Audet said in Wednesday’s announcement that Atlantic Broadband provides “an attractive entry” into the U.S. market. “There are sizable opportunities for growth including: increasing the penetration of the small and mid-sized business segment, and maximizing the bundling potential of services in the residential sector.” Audet said.
“We are very pleased to welcome all the employees of Atlantic Broadband into our organization.”
The proposed deal will require several regulatory approvals, including from U.S. competition and telecommunications bodies.
Atlantic Broadband is currently owned by a fund managed by ABRY Partners and by Oak Hill Capital Partners, LP.
