July 10, 2017 / 11:37 AM / 15 days ago

Cogeco to buy MetroCast assets for $1.4 billion to expand in the U.S.

(Reuters) - Canadian cable company Cogeco Communications Inc said on Monday its Atlantic Broadband unit would buy MetroCast's assets for about $1.4 billion, expanding its presence in the United States.

MetroCast is the latest acquisition in a rapidly consolidating U.S. cable sector that has seen regional providers find new homes in recent months. In April, U.S. cable mogul John Malone's Liberty Interactive Corp said it would acquire Alaska-based cable provider General Communication Inc while private-equity backed RCN announced it would buy Wave in May.

Cogeco shares rose about 2 percent to C$81.28.

The deal, which includes a $315 million equity investment by Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), will add about 120,000 internet and 76,000 video customers to Atlantic Broadband's U.S. base.

The deal allows the company "to increase its presence in the growing and lucrative U.S. cable market," Cogeco's Chief Executive Officer Louis Audet said in a statement. In an attempt to find growth outside of Canada, Cogeco first entered the U.S. market in 2012 when it bought Atlantic Broadband for $1.36 billion.

Cogeco said it expects MetroCast to have about $230 million in revenue for 2017 and adjusted earnings of $121 million. Cogeco said Atlantic Broadband should realize tax benefits of about $310 million, and after adjusting for these tax benefits, it is paying about 9 times MetroCast's adjusted annual earnings.

MetroCast's network covers areas in New Hampshire, Maine, Pennsylvania, Maryland and Virginia. Atlantic Broadband previously acquired MetroCast's Connecticut business in 2015.

Credit Suisse was Cogeco's financial adviser, and Stikeman Elliott and Kirkland & Ellis LLP were its legal advisers. Morgan, Lewis & Bockius LLP legally advised Harron Communications, which sold MetroCast. CDPQ was advised by CIBC Capital Markets and Osler, Hoskin & Harcourt LLP.

Reporting by Yashaswini Swamynathan in Bengaluru and Liana B. Baker in New York; Editing by Shounak Dasgupta, Bernard Orr

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