Audet family will not support Altice bid for Cogeco; analyst calls it unusual and "hostile"

The Audet family says it does not support a $10.3 billion bid by Altice USA (ATUS) for Cogeco Inc and Cogeco Communications, that would see Altice sell Canadian assets to Rogers Communications’ (RCI) (RCI-A.TO). The non-binding proposal is a cash offer to buy the Montreal-based company, with the Rogers side deal valued at $4.9 billion. An analyst says it is unusual for companies to announce a bid without getting controlling shareholders on board, and comes across as a “hostile takeover.”

“The non-binding proposal of Altice USA and Rogers Communications Inc., which was pre-emptively announced today by Altice and Rogers, has been reviewed by Gestion Audem Inc., a company controlled by the members of the Audet family holding 69 per cent of all voting rights of CGO which in turn controls 82.9 per cent of all voting rights of CCA,” Cogeco said in a release.

The release also said the bid “will be submitted to and reviewed by [Cogeco and Cogeco Communications’] boards of directors today.”

“Gestion Audem Inc. has already indicated that it does not intend to sell its shares and will not support the proposal.”

The Altice offer included $800 million for ownership of interests and voting shares held by Louis Audet, the executive chairman of Cogeco and his family.

The deal would give Altice all of the U.S. assets of Cogeco including Atlantic Broadband, a cable operator that provides services in 11 U.S. states.

Dave Heger, an analyst at Raymond James, said in an interview that the announcement from the Audet family rejecting the bid indicates “it’s a hostile takeover of sorts.”

“Usually a hostile takeover is when there isn’t a controlling shareholder like this, you’re just trying to get all the different shareholders on board with your offer. In this case, if you have a controlling shareholder typically you try to get them on board before you go public and have a deal offer. This is a little unusual, especially because the controlling shareholder has not bought into it.”

Heger added that in this situation Altice and Rogers would have at least tried to “get the buy-in of the controlling shareholders before going public with the deal.”

“Maybe they thought that if they went public with it, maybe the public shareholders would feel the pressure of selling,” he said.

The release from Altice indicated that family support is necessary for the controlling shareholder to complete the transaction.

“We greatly respect and appreciate the legacy the Audet family has created with Cogeco, building an iconic company across Canada and the U.S. that is driven by superior customer service and continues investments in technology,” Dexter Goei, CEO of Altice, said in a release.

“We are pleased to present this very attractive offer for Cogeco, and are confident that Mr. Audet and the Cogeco boards will act in the best interest of all shareholders and fairly evaluate this offer.”

A TD report expects the owners will not be willing to sell, but that if they do, Rogers will see a “material accretion” to its pre-existing ownership stake, as well as “above normal cost synergy prospects for a cable industry deal.”

“Given the existing coattail provisions, we see very low odds of this deal being consummated under the existing terms,” the note said.

A note from Canaccord Genuity also indicated that the Audet family “is in no rush to sell the company and could look to negotiate further before selling on a transaction.”

“We believe both Altice and Rogers would be willing to go higher to acquire the company’s assets, given that the U.S. valuation is largely in line with current peers... and that the Canadian business is highly synergistic with Rogers’ assets,” the note read.

Canaccord added that if the deal went through Rogers would have a “significant potential for cross-selling” of its other products.

In an interview with radio station FM93, Quebec Premier François Legault said that he spoke to Louis Audet this morning, and that they will do whatever possible to keep the company’s headquarters in Quebec.

With files from Canadian Press

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