Altice founder Patrick Drahi, left, and Dexter Goei, Chairman and CEO of Altice USA, pose for photos outside the New York Stock Exchange, before the company's IPO.Richard Drew/The Associated Press
The hostile bid for Cogeco by Rogers Communications Inc. and U.S. cable company Altice USA Inc. will be a “marathon, not a sprint,” Altice’s chief executive officer says, but both potential buyers are committed because the deal would offer them such attractive benefits.
At a virtual Bank of America Merrill Lynch conference on Wednesday, Altice CEO Dexter Goei answered questions about the origin and rationale for the $10.3-billion offer for Cogeco Inc. and Cogeco Communications Inc. In the proposed deal, New York-based Altice would acquire Cogeco’s U.S. cable network, Atlantic Broadband, while Rogers would get Cogeco’s Canadian business.
Acquiring Atlantic Broadband would provide Altice with cost savings through increased scale, Mr. Goei said. Rogers owns 41 per cent of the subordinate voting shares at Cogeco Inc. and 33 per cent of the subordinate shares at Cogeco Communications. The deal would be an opportunity for Rogers to consolidate the Canadian cable market, Mr. Goei said.
"Rogers not only would like to consolidate the market in Canada, but just as importantly, they have a large stake in [Cogeco] that is effectively dead money from their standpoint, because it’s been there for a very, very long time,” Mr. Goei said. “They’d like to be able to sort out their situation one way or the other.”
The unsolicited offer was rejected by Cogeco’s executive chairman, Louis Audet, and his family, which controls the business through its ownership of multiple voting shares. It also drew opposition from Quebec Premier François Legault, who raised concerns that the province could lose Cogeco’s Montreal headquarters.
Asked about next steps given the rebuff from the Audet family, Mr. Goei said, “I think this is something that I should refrain from talking about, given how public the situation is. We’re dealing with three different public companies.”
But neither Rogers nor Altice has been deterred. “This is a marathon, not a sprint,” Mr. Goei added. “We’re committed to trying to come to an end game."
Mr. Goei said Altice, which operates in 21 U.S. states, and Rogers – whose Canadian cable network is primarily in Ontario, New Brunswick and Newfoundland and Labrador – are ideal partners because neither is interested in the other’s territory.
In discussing the timing of the bid, Mr. Goei said an attractive opportunity is “not something that comes along every day.”
“It’s not something that you can plan for either,” he added. “The opportunity came to us as we got introduced to Rogers.”
Rogers CEO Joe Natale spoke about the takeover attempt earlier on Wednesday at the BofA Securities conference.
“We don’t have any desire at this moment to enter the U.S. market," Mr. Natale said. “When Altice reached out to us, we thought this could be a great partnership, and it has been that.”
Rogers has contemplated acquiring Cogeco’s Canadian operations for a long time, Mr. Natale said. “We just wanted to make our intentions perfectly clear,” he said.
The proposal offers the Audet family $800-million for their holdings. The family owns 10 per cent of the equity in Cogeco Inc., but controls 69 per cent of the votes at the company through shares that grant 20 votes each. Cogeco in turn owns a 33-per-cent equity interest in Cogeco Communications, but controls 83 per cent of the vote through multiple-voting shares that have 10 votes each.
Other shareholders would receive $106.53 per Cogeco share and $134.22 per Cogeco Communications share.
On Monday, Mr. Audet released a statement that said the family’s refusal to sell Cogeco is “definitive." Both Mr. Natale and Mr. Goei declined to comment Wednesday on how they will attempt to persuade the family.
“As we think about what’s next, we’ll come out and give people the benefit of our thinking,” Mr. Natale said.
TD Securities analyst Vince Valentini has said Rogers and Altice will likely try to sweeten or restructure the offer. They may also press the family to sell by threatening to compete more aggressively in Cogeco’s territory, Mr. Valentini said in a note to clients.
Mr. Goei said only that Altice is committed to continuing the process. “We’ll see where it ends up.”
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