Cogeco Top Holder Rejects Altice’s Sweetened $8.4B Buyout Deal

Altice’s C$11.1 billion ($8.43 billion) sweetened offer to buy Cogeco was rebuffed by the Canadian cable’s company’s top holder, the Audet family.

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In a statement on Oct. 18, Altice (ATUS) announced a revised offer to acquire 100% of the issued and outstanding shares of Cogeco. The enhanced buyout proposal included C$900 million ($682 million) to the Audet family for their ownership interests up from C$800 million offered previously.

All the multiple voting shares of Cogeco are controlled by Louis Audet and members of the Audet family. “Given the position of the controlling shareholder, its support is necessary to complete a transaction, and as such the Altice offer includes a sizeable premium on those shares,” Altice said.

“As we did on September 2^nd, 2020, following the announcement of their first unsolicited proposal, members of the Audet family unanimously reject this further proposal,” said Louis Audet, President of Gestion Audem. “Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal. We are not interested in selling our shares.”

Gestion Audem is controlled by members of the Audet family and holds 69% of all voting rights of Cogeco, which in turn controls 82.9% of all voting rights of Cogeco Communications.

Altice had also revised its arrangement with the largest long-term shareholder of Cogeco, Rogers Communications to sell all the Canadian assets of Cogeco at an adjusted net price of C$5.2 billion. Upon completion of the deal, Altice would own all the US assets (Atlantic Broadband) of Cogeco, and Rogers would own the Canadian assets. If however by Nov. 18, Altice is unable to reach a mutually satisfactory agreement, it will withdraw the revised offer.

Altice provides cable TV services to 5 million customers in 21 states. The company owns several cable broadcast brands, and operates both local and international news networks. (See Altice stock analysis on TipRanks)

ATUS shares, which are up 4.7% so far this year, score a unanimous Strong Buy analyst consensus based on 10 Buys. The $35.56 average price target implies 24% upside potential to current levels.

Bernstein analyst Peter Supino earlier this month upgraded the stock to Buy from Hold with a $34 price target, calling ATUS a “cheap stock of a solid business” as “absolute and relative valuation multiples stand at all-time lows”.

Supino noted that Altice’s “underlying fundamentals bottomed earlier in 2020” but he believes that Q3 results in early November will be a “positive step in the gradual process of rebuilding investor trust and engagement.”