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Altice Isn’t Holding Its Breath for Cogeco Deal

Dexter Goei
(Image credit: Altice USA)

While Altice USA CEO Dexter Goei is still holding out hope that its latest offer to buy Canadian cable operator Cogeco will be accepted, he is cognizant that right now, the odds don’t look so good.

Altice USA made its first offer for Cogeco on Sept. 2, a $7.8 billion joint offer with Canadian telecom giant Rogers Communications. Altice would buy Cogeco’s U.S. operations -- Atlantic Broadband -- for $3.6 billion, while Rogers would snap up its Canadian businesses for $4.2 billion. That offer was quickly rejected by Gestion Audem, the holding company for Cogeco’s founding Audet family’s controlling interest in the company. In rejecting that offer, Cogeco executive chairman Louis Audet, also the controlling member of Gestion Audem, said the family had no intention of selling its interest, adding that its stance was “not a negotiating tactic.” 

That didn’t stop Altice from sweetening its offer by about $600 million to $8.4 billion -- $3.9 million for Atlantic Broadband -- on Oct. 18,   adding that the company had until Nov. 18 to accept the bid. Gestion Audem wasted little time to reject the new offer, adding that same day that “Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal.”

Goei, during a conference call with analysts to discuss Q3 results on Thursday, admitted that it looks like a Cogeco deal won’t materialize, but he wasn’t folding all of his cards just yet.

“We’re very cognizant that the controlling shareholder needs to be acquiesced,” Goei said on the conference call. “Based on his rhetoric and his statements to date, I think it's fair to say that there is a low chance of us collectively with Rogers being able to move forward on this project. Formally we’ve got until Nov. 18, so we’ll see if anything shakes out.”

Although it seems unlikely that Atlantic Broadband will be joining the Altice fold anytime soon, Goei said he was encouraged by the M&A opportunities that exist in the U.S. market, particularly with smaller operators. He pointed to Altice’s July purchase of Service Electric Cable TV of New Jersey, which he said has grown since the purchase with little extra effort.

“We are out there looking at a handful of things,” Goei said, adding that given Altice USA’s 21-state footprint, there are several opportunities to find small systems contiguous to its operating area. 

“It’s not necessarily that easy to unlock all of this, but given the environment, given the interest rate environment, given that size does really matter here in terms of getting operational synergies and investing heavily in technology and customer service, it is starting to percolate that some of the smaller operators, the Mom and Pop guys, are looking to deal,” Goei said.

He pointed to Service Electric, which needed some investment in its network and didn’t have a consistent marketing strategy when Altice first bought it, and has responded well with minimal effort. 

“We’re seeing a lot of low hanging fruit just by adding two or three additional sales people both on the SMB side and the B2B side that’s been very lucrative for us just increasing penetration out there, bringing new products and we’re upgrading the network as quickly as we can,” Goei said. “Everything that we are able to get our hands on in terms of M&A opportunities will be the best use of our capital.”

Altice USA expects about $1.1 billion in proceeds from its sale of a 49% interest in its Lightpath division to Morgan Stanley Infrastructure Partners. While that money could be used to help finance system purchases, Goei added that if no M&A opportunities are found, the next best use for that cash could be share repurchases.