On Monday, June 8^th, Cogeco Cable Inc. (TSX: CCA) announced that its subsidiary Atlantic Broadband had acquired substantially all of the assets of MetroCast Connecticut for $200.0 million.  MetroCast Connecticut is a subsidiary of MetroCast Communications of Connecticut, LLC, in which Harron Communications, L.P. is the parent company. 

Valuation Analysis and Deal Metrics

 
Transaction Facts

• Excluding the tax benefit, the value of the assets is approximately $165.9 million.
• The transaction will be funded primarily through non-recourse debt issued by Atlantic Broadband.
• Deal expected to close by Q3 2015.
• Expected 2015 revenue for MetroCast is approximately $45.0 million.
• 2015 adjusted EBITDA is projected to be approximately $21.0 million.
• MetroCast Connecticut customers will be offered TiVo, as one of the results of the deal.

Strategic Considerations

• MetroCast Connecticut has approximately 70,000 residential and commercial passings in the Connecticut area.
• MetroCast Connecticut brings its connections of approximately 23,000 television, 22,000 internet, and 8,000 phone customers.
• Transaction will further Cogeco Cable’s efforts for geographic expansion in the U.S. market.
• Louis Audet, President and CEO of Cogeco Cable said “This transaction enhances our growth profile through the planned launch of new residential services such as TiVo and Metro Ethernet for businesses.”

 JSICA’s Take

• Marks another acquisition in the cable industry by a non-U.S. company within the last month.   
• Deal continues the streak of an active M&A market in the cable industry.
• Acquisition should allow Cogeco and Atlantic Broadband to expand the geographic area that the companies serve.