Altice USA Inc’s (ATUS.N) C$10.3 billion ($7.9 billion) offer on Wednesday to snap up the U.S. assets of Cogeco Inc (CGO.TO) and sell the rest to Rogers Communications Inc (RCIb.TO) has been rejected by the Canadian cable company’s top investor.
“Members of the Audet family unanimously reiterated that they are not interested in selling their shares,” Louis Audet, president of Gestion Audem Inc, said in a statement. Gestion Audem is the holding company of the Audet family that holds a majority voting share in Cogeco.
New York-based Altice’s unsolicited offer is the latest consolidation play in the U.S. cable sector as fierce price competition and the need for significant investments exert pressure on the reliable cash flows of these stable businesses.
Cable TV providers have also been struggling as consumers cancel cable and satellite television subscriptions and shift to online video streaming such as Netflix Inc (NFLX.O) and Amazon.com Inc’s (AMZN.O) Prime Video.
Rogers, which owns about 34% of Cogeco, said buying the company’s Canadian assets will help it expand services to 1.8 million homes and businesses in the country.
Cogeco shares jumped as much as 33% before paring gains to end 15% higher, while Rogers closed up 4.7%. Altice USA rose 3.5%.
If completed, it would be the biggest Canadian telecoms merger deal since BCE Inc (BCE.TO) completed the spinoff of its stake in Nortel Networks in a transaction valued at C$88.7 billion, according to Refinitiv data.
Altice said it has valued Cogeco’s U.S. assets, Atlantic Broadband, the country’s ninth largest cable operator, at about C$4.8 billion. Altice said the proposed purchase of Atlantic Broadband would allow it to build on its previous cable acquisitions in the United States and expand operations across 11 states on the East Coast.
The proposed deal “fills in holes in the Rogers network and helps pull together the Cogeco properties,” Mark Goldberg, a longtime telecoms consultant, said. “You’re not lessening competition but instead bringing some new efficiencies.”
Because Cogeco is a family business, that makes the deal more complicated.
“You’ve got to ensure that the family gets from the deal what they are hoping to get,” Goldberg said. “It’s not a dispassionate controlling shareholder.”
Founded in 1957, Cogeco began as a Quebec-based TV station and grew into a phone, cable and internet provider, expanding into Ontario.
Cogeco entered the U.S. market in 2012 when it bought Atlantic Broadband for $1.36 billion, aiming to find growth outside of Canada.