Newspaper article The Canadian Press

Cogeco Cable to Buy Internet Infrastructure Company Peer 1 Network for $526M

Newspaper article The Canadian Press

Cogeco Cable to Buy Internet Infrastructure Company Peer 1 Network for $526M

Article excerpt

Cogeco Cable to buy Peer 1 Network

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MONTREAL - Cogeco Cable announced plans Friday for its second major acquisition since the summer, a friendly $526-million deal to buy Canadian Internet infrastructure provider Peer 1 Network Enterprises.

The Montreal-based cable company is offering $3.85 in cash per share -- 90 cents per share above Peer 1's closing price of $2.95 Thursday on the Toronto Stock Exchange and a 32 per cent premium on the average share price over 20 days.

Peer 1 (TSX:PIX) shares shot up nearly 30 per cent, or 88 cents, to $3.83 in midday trading Friday, while Cogeco Cable (TSX:CCA) stock slid $1.76, or 4.3 per cent, to $39.21.

The offer values Peer 1 Network's equity at $526 million on a fully diluted basis, while Cogeco says Peer 1 has an enterprise value of $635 million, after including other factors.

"There are compelling strategic, operational and financial reasons for this transaction," Cogeco chief executive Louis Audet told a conference call with analysts.

Among other things it increases the scale of Cogeco's existing large business enterprise business into the small- and medium-sized market which has "significant growth prospects."

"It (also) enlarges our footprint and builds on what we had already put together and it gives us access to a state of the art data centre platform across North America and starting in Europe," he added.

Maher Yaghi of Desjardins Capital Markets said the transaction will increase Cogeco's debt, making it less likely that its dividend will be increased in the short to medium term.

"Overall, we see the strategic rationale in acquiring PEER 1, as it should give Cogeco Cable an additional platform for growth in the lucrative SMB market," he wrote in a report.

He said the acquisition will also enhance the company's capabilities and potentially allow for revenue synergies, but not likely additional profits in the medium term.

Cogeco attempted unsuccessfully to expand into Europe several years ago but had to pull out after major losses with an acquisition in Portugal.

In July, Cogeco Cable Inc., Canada's fourth-largest cable TV company with operations in Quebec and southern Ontario, entered the U. …

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