Cogeco chief financial officer Patrice Ouimet said the motivation for Rogers Communications’ hostile bid for his company may be primarily driven by the larger telecom firm’s desire to keep Cogeco out of the wireless business.
Rogers, along with Altice USA, launched an unsolicited $7.8 billion bid for Cogeco on Sept. 2. The deal was split into two parts -- Rogers would pay $4.2 billion for Cogeco’s Canadian telecom assets while Altice USA would put up $3.6 billion for Cogeco’s U.S. cable business, Atlantic Broadband. Cogeco’s controlling shareholder -- the Audet family -- rejected the deal, saying in a statement last week that its rejection was not a negotiating tactic, but was indeed final.
At the BMO Capital Markets Media & Communications conference Tuesday, Ouimet said the company was not surprised by the Rogers and Altice USA bids, but was taken aback by how they did it.
“The interest in our company is not that surprising,” Ouimet said. “We have attractive assets in both countries and we have had strong performance as well -- we’ve performed very well in the past two or three years. Proceeding with a hostile offer on a family-owned company was something that was surprising to us. Not the interest, but the way it was done, especially since the Audet family had indicated the night before that they would not sell in the transaction.”
Ouimet also was puzzled concerning the timing of the bid, speculating that it may be tied to Cogeco’s plans to launch a wireless service. Cogeco submitted a plan to offer a Hybird Mobile Network Operator (HMNO) wireless service, using its own spectrum and leasing network space from other carriers , to the Canadian Radio-television and Telecommunications Commission in February. That proposal is still awaiting approval from the regulatory agency.
“Taking Cogeco out of the equation for Rogers is probably part of the equation to launch a hostile bid right now,” Ouimet said.
Later at the same conference on Tuesday, Rogers CEO Joe Natale said the impetus behind the bid is whether Cogeco, which mainly operates in Quebec, will be a part of Rogers’ plans for the rest of the country. Rogers is the largest telecom operator in Canada.
“As we sit here with our board and make our capital plans for the medium and the long term, we’re asking a very fundamental question -- Do our plans include Cogeco territory or not?” Natale said. “It’s a question that we’ve asked over the years.”
Natale added that Rogers has been the largest individual shareholder in Cogeco for years, and though it has a 33% economic stake, the Audet family controls nearly 70% of the vote.
“The question as we enshrine our capital plans and look at driving innovations, is that with Cogeco inside as part of a partnership here or is it not?” Natale said. “I’d hate to miss this technology innovation cycle and not have answered the question.”
Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.
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