Altice USA’s $7.8 billion bid for Canadian operator Cogeco has cast the spotlight on its U.S. cable gem, Atlantic Broadband
Atlantic Broadband burst on the scene in 2003 after its purchase of 230,000 subscribers in Florida and western Pennsylvania from Charter Communications (it closed the deal in 2004). That $735 million buy, backed by ABRY Partners, Oak Hill Capital and Merrill Lynch & Co., thrust its two top executives, former Continental Cable president Ed Holleran and former CEO David Keefe immediately into the top 15 cable operators in the country.
The next eight years were characterized by smaller acquisitions, building out its network and organic growth. By June 2012, ABB was looking for a buyer and about a month later it found one -- Canadian cable and telecom company Cogeco. Cogeco agreed to buy ABB for $1.4 billion, and saw the U.S. operator as a vehicle to consolidate the American cable business.
Atlantic Broadband did not disappoint, engineering a series of smaller deals -- like Harron Communications’ MetroCast Connecticut systems for $200 million -- and culminating in its 2018 purchase of the rest of Harron’s Metrocast properties for $1.4 billion.
The MetroCast purchase was the largest for ABB since the Cogeco purchase and represented an integration challenge for the company, which it pulled off without a hitch.
In the past few years ABB has focused on smaller purchases, including a small regional fiber company -- FiberLight -- in Florida in 2018, a system in Springfield, West Virginia from Comcast in 2019, and in January, Southeastern Connecticut broadband services company Thames Valley Communications for about $50 million.
Cogeco said Wednesday afternoon that it had received the Altice USA offer and that it would review it, but that its controlling Audet family has said it does not want to sell. Analysts that follow Altice have noted that rejection was probably expected. Evercore ISI media analyst James Ratcliffe wrote that the holdout could be Cogeco chairman Louis Audet and that the bid was likely made public to sway other family members.
Whether Altice USA raises its bid -- Cogeco stock already was up 15% to C$114.17 on Wednesday afternoon, well above the offer price of C$106.53 per share -- or another suitor enters the fray, ABB appears to be in play.
That could be good news for Atlantic Broadband and the rest of the industry. Unlike other potential distribution assets that could find their way to the auction block -- AT&T is reportedly considering selling off a majority stake in satellite TV giant DirecTV -- ABB is considered to be well-run -- it has about 480,000 broadband customers and passes 1.1 million homes -- and could present some upside for a buyer. According to Barclays analyst Kannan Venkateshwar, 70% to 80% of ABB's footprint competes with slower speed digital subscriber line service and its broadband penetration is low at around 40%. Altice USA, with 49% broadband penetration, has been aggressive in building out fiber and boosting internet speeds, but so would any other buyer.
“This potentially provides an opportunity to enhance the growth trajectory for ABB,” Venkateshwar wrote.
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