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. 

U.S. cable provider Charter Communications (NASDAQ: CHTR) announced on Sunday, May 26^th that it had reached an agreement to merge with one of its competitors, Time Warner Cable (NYSE: TWC) in a deal worth approximately $78.7 billion.  The deal marks Charter’s second major acquisition in the last few months, when the firm announced on March 31^st that it had acquired over an 80 percent stake in Bright House Networks. 

Valuation Analysis and Deal Metrics

Transaction Facts

• Charter Communications announced on May 26, 2015 that is was merging with cable competitor Time Warner Cable for approximately $195.71 per share. 
• Charter will fund the deal primarily through equity, along with new and existing debt, as well as cash.
• The transaction has an equity value of approximately $56.7 billion.
• Expected to close by the end of 2015.
• The deal includes a $2.0 billion breakup fee.

Strategic Considerations

• Transaction is expected to generate approximately $800.0 million in cost synergies. 
• Transaction may give Charter more leverage in negotiating contracts with programmers. 
• Transaction significantly improves opportunities for Wi-Fi service offerings. 
• Including Bright House and Time Warner Cable, Charter’s 2014 pro forma revenue would have increased from $9.1 billion to $35.7 billion. 
• Transaction makes it so that Charter is able to compete with the heavy competition amongst the top cable companies in the video marketplace, which as of now includes Comcast, Dish, and DirecTV & AT&T (deal awaiting approval).

JSICA's Take

• Charter-TWC transaction, when compared to some of the priced transactions in this industry since the beginning of 2012, comes in relatively in line with those multiples.
• The average EV/LTM Revenue for priced transactions since 2012 was approximately 3.2x, compared to 3.4x in this transaction.
• The average EV/LTM OIBDA for priced transactions since 2012 was about 8.6x, compared to 9.3x in this transaction.
• Compared to last year’s proposed Comcast-TWC deal that was terminated, Charter paid 0.2x more EV/LTM Revenue and 0.5x more EV/LTM OIBDA to merge with Time Warner.
• The deal seems to be much more attractive financially when compared to the recent cable deal in which Altice (AMS:ATC) agreed to acquire 70% of U.S. cable company, Suddenlink, which came in at roughly 3.9x EV/LTM Revenue and 10.0x EV/TTM OIBDA.

Currently, the FCC is looking into this transaction to determine how American consumers would benefit as a result of this merger, if it were to be approved.

U.S. cable provider Charter Communications (NASDAQ:CHTR) announced on Tuesday, March 31^st that it had acquired Bright House Networks, in a deal worth approximately $10.4 billion.  The transaction will result in Charter owning over 80 percent of Bright House Networks once the deal closes.  The transaction increases Charter’s footprint in the U.S. and helps it compete against other large cable providers.

Valuation Analysis and Deal Metrics

Transaction Facts

• Charter Communications announced on May 26, 2015 that is was acquiring cable competitor, Bright House Networks for approximately $10.4 billion. 
• Charter will finance the transaction through approximately $2.0 billion in cash, $2.5 billion of convertible preferred partnership units, and $5.9 billion of common partnership units.
• In the deal, Charter will own approximately 86-87% of Bright House and Advance/Newhouse (a parent of Bright House) will own the remaining 13-14%.
• Expected to close by the end of 2015.

 Strategic Considerations

• Transaction further increases Charter’s footprint across the United States.   
• Increases competition in the already competitive cable industry. 
• Bright House is the largest cable operator in Tampa and Orlando, Florida.
• Gives Charter the ability to leverage its operating structure and platform investments.

JSICA's Take

• Charter-BHN transaction, when compared to some of the priced transactions in this industry since the beginning of 2012, comes in significantly lower multiples.
• Based off of the average EV/LTM Revenue for priced transactions since 2012, Charter paid 0.5x lower in this transaction.
• Based off of the average EV/LTM OIBDA for priced transactions since 2012, Charter paid 1.1x lower in this transaction.