Shoppers pass a Cogeco location in LimeRidge Mall in Hamilton on Sept. 2, 2020.The Globe and Mail
A Cogeco Inc. shareholder is urging the Audet family to give other investors a say on a sweetened takeover bid worth $11.1-billion that the family swiftly dismissed on Sunday, just hours after it was tabled.
Rogers Communications Inc. and New York-based cable company Altice USA Inc. raised their offer for Quebec-based Cogeco Inc. and subsidiary Cogeco Communications Inc. by $800-million, representing a premium of 51 per cent from the price before the first bid in September, which the family also rejected. The deadline for the new offer is Nov. 18.
The target cable companies said Monday they will submit the new bid to their boards for review, but stressed that the Audet family, who control the two companies through multiple voting shares, had already ruled out the unsolicited offer.
The new offer amounts to $123 a share for Cogeco, up from $106.53 in the previous offer. Shareholders of Cogeco Communications, the more widely held stock, are being offered $150 a share, compared with $134.22 earlier.
Analysts on Monday wondered if the companies' independent directors might take a stand in favour of talking to the bidders. And at least one shareholder expressed frustration with the Audets' intransigence.
The family’s refusal to consider the sweetened offer would be more suited to a private company than public ones, said Julian Klymochko, chief executive of Accelerate Financial Technologies. It owns an undisclosed number of shares in Cogeco and Cogeco Communications, and he says rejecting the new bid represents a big lost opportunity for investors.
“There’s over $1-billion in shareholder value that they are basically taking from other shareholders,” he said. “The only reason they can do that is through their multiple voting shares. Their economic interest in the corporation is so small, and what do we call that? It’s just terribly bad corporate governance.”
Gestion Audem Inc., the Audet family holding company, owns 69 per cent of the voting rights in Cogeco, but holds just 3.3 per cent of the equity.
The new offer will be withdrawn if the suitors cannot reach a “mutually satisfactory agreement” with the family by the time the bid expires, Altice said. The offer would see Altice, the fourth-largest U.S. cable company, acquire Cogeco’s U.S. assets, ninth-ranked Atlantic Broadband, for $5.1-billion. Rogers would snap up Cogeco’s Canadian assets for a net price of $3.7-billion.
The Audets have their own expansion plan for Atlantic Broadband: an acquisition strategy backed by Quebec’s giant public pension plan, the Caisse de dépôt et placement du Québec.
Altice chief executive Dexter Goei said the improved offer follows recent talks with holders of subordinate voting shares in the two Cogeco companies.
Altice and Rogers are offering the Audet family $900-million for their stake, an increase of $100-million. “Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy but a definitive refusal. We are not interested in selling our shares,” Louis Audet, executive chairman of Cogeco, said in a statement.
Mr. Klymochko said he hopes the refusal from the Audet family is “a negotiating tactic. However, they have indicated it is not.”
Canaccord Genuity analyst Aravinda Galappatthige said he’s not aware of any path forward for the would-be acquirers if the family stands firm, but the new offer could put pressure on independent directors. “We believe that the acquirers may be hoping for more vocal support from the public shareholders given the aforementioned 51-per-cent premium,” Mr. Galappatthige said in a note to clients.
Shares of Cogeco Communications fell more than 1 per cent to $101.89 on Monday, while Cogeco fell 0.5 per cent to $84.11.
Mr. Galappatthige said another higher bid is unlikely unless there was movement from parties other than Altice and Rogers.
National Bank Financial analyst Adam Shine said that if the bidders up the ante again, he expects it would include $1-billion for the Audets and about $160 a share for Cogeco Communications. “Will that then be enough? It’s not a given,” Mr. Shine wrote.
The Caisse remains “aligned with the Audet family,” Caisse spokesman Maxime Chagnon said Monday. The revised takeover bid unveiled Sunday values the Caisse’s 21-per-cent stake in Atlantic at about US$819-million.
Rogers vowed last month to boost spending in Quebec if the bid is successful. Rogers is the largest shareholder in the Cogeco companies, owning about a third of the equity in both – an investment that goes back two decades.
The pension-fund giant said last month it backs the family’s plan to build Atlantic Broadband with an acquisition-based growth strategy.
The Caisse invested US$315-million in Atlantic Broadband in 2017 to help pay for the purchase of a rival U.S. cable company. The revised takeover bid from Altice and Rogers unveiled Sunday values the Caisse’s 21-per-cent stake in Atlantic at about US$819-million.
Rogers vowed last month to ramp up spending in Quebec if the takeover bid is successful. The initial Rogers-Altice bid was for $10.3-billion but failed to win support from Gestion Audem Inc., the Audet family holding company. The company owns 69 per cent of the voting rights in Cogeco but holds just 3.3 per cent of the equity.
Rogers is the largest shareholder in both Cogeco companies, owning about a third of the equity in both – an investment that goes back two decades. If the takeover bid is unsuccessful, analysts say Rogers will likely sell its stakes, which are worth approximately $1.7-billion.
With a report from Nicolas Van Praet.
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