Cogeco to buy WOW’s Ohio broadband systems for $1.1bn

Cogeco Communications' Atlantic Broadband has agreed to acquire all the broadband systems in Ohio owned by WideOpenWest.

Cogeco Communications’ Atlantic Broadband has agreed to acquire all the broadband systems in Ohio owned by WideOpenWest. The deal, expected to close early next year, reflects a purchase price of $1.125 billion. Englewood, Colorado-based WOW is a portfolio company of Crestview Partners. Based in Montreal, Cogeco is a communications business.

PRESS RELEASE

MONTRÉAL and QUINCY, Mass., June 30, 2021 /CNW Telbec/ – Today Cogeco Communications Inc. (TSX: CCA) announced that its subsidiary, Atlantic Broadband, has entered into a definitive agreement with WideOpenWest, Inc. (WOW) to purchase all of its broadband systems located in Ohio (“the Ohio broadband systems”).

The WOW Ohio broadband systems pass approximately 688,000 homes and businesses in Cleveland and Columbus and serve approximately 196,000 Internet, 61,000 video and 35,000 telephony customers, as of March 31, 2021. For the twelve months ended March 31, 2021, revenue was US$244 million and pro forma adjusted EBITDA, including adjustments to reflect the expected cost structure of Atlantic Broadband and run-rate synergies, would have been US$103 million.

“The acquisition of WOW’s Ohio broadband systems allows us to add significant scale to our growing and profitable U.S. broadband business,” said Philippe Jetté, President and Chief Executive Officer of Cogeco Communications Inc., the parent company of Atlantic Broadband. “The acquisition also represents a strong strategic fit for Cogeco Communications as it is complementary to Atlantic Broadband’s existing footprint and capitalizes on its existing platform. Under the guidance of Atlantic Broadband’s experienced management team, we are in a unique position to grow our customer base, revenues and earnings, and to pursue our market expansion strategy.”

“We are taking a major step in advancing Atlantic Broadband’s high-growth strategy by expanding our reach beyond the east coast footprint with attractive markets, that will be strongly receptive to our customer-centric focus, superfast Internet, best-in-class managed WiFi and advanced video services,” said Atlantic Broadband President, Frank van der Post. “The Ohio broadband systems’ geographic fit with our Pennsylvania operations, combined with our success in winning customer share in competitive markets and our experience integrating acquired properties, will ensure operational efficiencies, a seamless transition for customers, and strong growth in these markets. To support us in our future growth plans, we look forward to welcoming our new colleagues located in Ohio into the Atlantic Broadband family.”

Atlantic Broadband has entered into a Transition Service Agreement which will ensure a smooth transition period and allow Atlantic Broadband to further upgrade the network and launch its products and services, including a state-of-the-art IPTV platform.

The acquisition has significant strategic benefits including:
Adds scale to Cogeco Communications’ U.S. broadband services segment which continues to exhibit superior growth and is expected to keep generating strong operating margins. Atlantic Broadband’s Internet service customers will increase by 38 percent from approximately 511,000 to 707,000 pro forma the acquisition. With this acquisition, more than half of Cogeco Communications’ revenue will be generated by the U.S. business.
Expands Atlantic Broadband’s geographical footprint in markets with very attractive demographic profiles and economies.

Leverages Atlantic Broadband’s product and sales expertise to increase the customer base and deliver superior growth.

Network footprint reaches a sizable portion of the Columbus and Cleveland markets, making it easier to operate and to market products.

Quality network, with 100 percent of homes passed served by a DOCSIS 3.1 platform with speeds of 1 Gbps offered in the entire footprint.

The Ohio broadband systems will be purchased for US$1.125 billion. In conjunction with the transaction, Atlantic Broadband expects to realize tax benefits with a present value of approximately US$140 million. These benefits are mostly due to the tax amortization of intangible assets in an asset purchase transaction where such intangible assets are stepped up to current market value. Post the Transition Service Agreement period, Atlantic Broadband expects to achieve run-rate annual synergies of US$2 million. After adjusting for these tax benefits and synergies, the purchase price represents a multiple of approximately 9.6x pro forma adjusted EBITDA for the twelve month period ended March 31, 2021. The purchase price is subject to customary closing adjustments.

The purchase price and transaction costs will be financed through a US$900 million committed secured debt financing at the Atlantic Broadband level, and excess cash on hand. The transaction is subject to regulatory approvals along with other customary closing conditions and is expected to close in the first quarter of fiscal 2022.

Advisors
Credit Suisse is acting as exclusive financial advisor to Cogeco Communications Inc. Credit Suisse and Wells Fargo are providing the committed debt financing for the transaction. Morgan, Lewis & Bockius LLP is acting as legal advisor on the acquisition to Cogeco Communications and

Kirkland & Ellis LLP is acting as legal advisor on the financing.

ABOUT ATLANTIC BROADBAND
Atlantic Broadband, a subsidiary of Cogeco Communications Inc. (TSX: CCA), is the eighth-largest cable operator in the United States, based on the number of high-speed Internet service customers served. The company provides its residential and business customers with Internet, video and telephony services in 11 states: Connecticut, Delaware, Florida, Maine, Maryland, New Hampshire, New York, Pennsylvania, South Carolina, Virginia and West Virginia. Atlantic Broadband is headquartered in Quincy, Massachusetts. To learn more about Atlantic Broadband, please visit www.atlanticbb.com.

ABOUT COGECO COMMUNICATIONS INC.
Cogeco Communications Inc. is a communications corporation. It is the eighth-largest cable operator in North America, operating in Canada under the Cogeco Connexion name in Québec and Ontario, and along the East Coast of the United States under the Atlantic Broadband brand (in 11 states from Maine to Florida). The Corporation provides residential and business customers with Internet, video and telephony services through its two-way broadband fibre networks. Cogeco Communications Inc.’s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CCA).