Cogeco Inc. (TSX: CGO) (“Cogeco”) and Cogeco Communications
Inc. (TSX: CCA) (“Cogeco Communications”, and together with Cogeco,
the “Corporations”) announced today that CDPQ (Caisse de dépôt et
placement du Québec) will become an anchor investor in
Cogeco Communications as part of the sale by Rogers
Communications Inc. (“Rogers”) of the entirety of its holdings in
Cogeco and Cogeco Communications. Cogeco will repurchase for
cancellation 5,969,360 of its Cogeco subordinate voting shares (the
“CGO SVS”) from CDPQ. Cogeco Communications will repurchase for
cancellation 2,266,537 Cogeco Communications subordinate
voting shares (the “CCA SVS”) from Cogeco, following the
conversion of the same number of Cogeco Communications multiple
voting shares. CDPQ has also entered into an agreement to
sell 5,302,278 of the CCA SVS acquired from Rogers by way of a
bought block trade (the “Bought Block Trade”) facilitated by a
syndicate of underwriters led by CIBC Capital Markets and UBS
Securities Canada.
The purchase price in all transactions for each
CGO SVS was set at $46.91 (the “CGO SVS
Price”) and the purchase price for each CCA SVS was set at
$51.40 (the “CCA SVS Price”), representing, in each case, a
10% discount relative to the closing price of each of the CGO SVS
and the CCA SVS on December 11, 2023. The price per share to be
paid by CDPQ to Rogers to acquire the CGO SVS and CCA SVS currently
held by Rogers was negotiated at arms’ length between CDPQ and
Rogers.
Structure of the
Transactions
CDPQ will initially acquire all of the 5,969,390
CGO SVS and all of the 10,687,925 CCA SVS currently held by Rogers
for an aggregate amount of $829 million.
Cogeco will then purchase for cancellation from
CDPQ all of the CGO SVS previously held by Rogers at the CGO SVS
Price, for an aggregate purchase price of $280 million. In
order to partially finance such purchase, Cogeco will concurrently
sell to Cogeco Communications and CDPQ, 2,266,537 CCA SVS
and 1,423,692 CCA SVS, respectively, following the conversion
and cancellation of an equivalent number of Cogeco Communications
multiple voting shares (the “CCA MVS”), at the CCA SVS Price.
CDPQ will concurrently sell CCA SVS through the
Bought Block Trade. The CCA SVS being sold by CDPQ have not been
registered under the U.S. Securities Act of 1933, as amended. This
news release is not an offer of securities for sale in the United
States and CCA SVS may not be offered or sold in the United States
except pursuant to an exemption from registration.
The net effect of the foregoing transactions
will be the following:
- Cogeco
Communications share repurchase of $117 million of CCA SVS
(2,266,537 shares) representing approximately 5.1% of all
outstanding Cogeco Communications shares
- Cogeco share
repurchase of $280 million of CGO SVS (5,969,390 shares)
representing approximately 38.2% of all outstanding Cogeco
shares
- The number of CCA
MVS outstanding will be reduced by 23.5% due to the
conversion described above, the number of CCA SVS outstanding will
be increased by 4.9%, and the number of outstanding CGO SVS will be
reduced by 42.6%
- Bought Block Trade
of 5.3 million CCA SVS representing an increase in Cogeco
Communications’ public float of 29.5%
- CDPQ will hold
6,809,339 CCA SVS representing approximately 16.1% of all
outstanding Cogeco Communications shares
Cogeco
|
Status Quo as of December
11th, 2023, Before Aforementioned
Transactions |
Pro Forma1 |
|
Number of SharesOutstanding |
% of Total Shares
Outstanding |
Number of SharesOutstanding |
% of Total Shares
Outstanding |
Gestion Audem |
1,748,469 |
11.20% |
1,748,469 |
18.13% |
Other Directors & Officers |
36,320 |
0.23% |
36,320 |
0.38% |
Rogers |
5,969,390 |
38.24% |
- |
- |
Public |
7,857,990 |
50.33% |
7,857,990 |
81.49% |
Total |
15,612,169 |
100.00% |
9,642,779 |
100.00% |
Cogeco Communications
|
Status Quo as of December
11th, 2023, Before Aforementioned
Transactions |
Pro Forma1 |
|
Number of SharesOutstanding |
% of Total Shares
Outstanding |
Number of SharesOutstanding |
% of Total Shares
Outstanding |
Cogeco |
15,691,100 |
35.27% |
12,000,871 |
28.42% |
Other Directors & Officers |
162,872 |
0.37% |
162,872 |
0.39% |
Rogers |
10,687,925 |
24.02% |
- |
- |
CDPQ |
- |
- |
6,809,339 |
16.13% |
Public |
17,946,581 |
40.34% |
23,248,858 |
55.06% |
Total |
44,488,478 |
100.00% |
42,221,940 |
100.0% |
Benefits of the transactions for Cogeco
and Cogeco Communications shareholders
- Immediately
accretive on a net asset value per share and free cash flow per
share basis for Cogeco shareholders resulting from the share
repurchase and the sale of a portion of its investment in Cogeco
Communications
- Immediately
accretive on a free cash flow per share basis for Cogeco
Communications shareholders resulting from the share
repurchase
- The public float of
CCA SVS will be increased by 29.5% to 23,248,858 shares
therefore enhancing trading liquidity
“This transaction is a unique opportunity for
the Corporations to repurchase shares at an attractive price to
realize multiple benefits while ensuring we have the ability to
deliver our strategic plan,” said Philippe Jetté, President and
Chief Executive Officer of Cogeco Inc. and Cogeco Communications
Inc. “Given the current prices of our stocks, which we believe are
undervalued, buying back shares represents an attractive use of our
capital to build shareholder value,” added Mr. Jetté.
“Already active with Cogeco Communications
through past acquisitions, CDPQ is supporting the growth projects
of this leading telecommunications company as connectivity needs
continue to grow. This major share purchase, orchestrated by CDPQ,
is key for the company and its plan to develop the North American
market,” said Kim Thomassin, Executive Vice-President and Head of
Québec at CDPQ
Financial Details
Concurrently with the closing of the
transactions, Cogeco will put in place a three-year $75 million
term loan. Cogeco will initially finance its $280 million
repurchase of CGO SVS and other related transaction costs and
expenses through (i) $117 million in proceeds resulting from a
repurchase for cancellation by Cogeco Communications from Cogeco of
CCA SVS (resulting from the conversion of the same number of CCA
MVS) at the CCA SVS Price; (ii) $73 million in proceeds
resulting from a sale by Cogeco to CDPQ of CCA SVS (resulting from
the conversion of the same number of CCA MVS) at the CCA SVS Price;
and (iii) a drawdown from its term loan and credit facilities.
Cogeco Communications will initially finance the
$117 million repurchase of CCA SVS and other related
transaction costs and expenses through a drawdown on Cogeco
Communications’ existing term revolving facility.
Governance and Approvals
A special committee of the board of directors of
Cogeco (the “CGO Independent Committee”),
established in connection with the transactions and composed
exclusively of independent directors of Cogeco, unanimously
determined, after consultation with its external independent legal
and financial advisors, that the repurchase of CGO SVS is in the
best interests of Cogeco. RBC Capital Markets provided the CGO
Independent Committee with a fairness opinion stating that the
consideration to be paid by Cogeco to repurchase its CGO SVS is
fair from a financial point of view to Cogeco. After receipt of the
unanimous recommendation of the CGO Independent Committee, the
repurchase of CGO SVS was unanimously approved by the board of
directors of Cogeco.
A special committee of the board of directors of
Cogeco Communications (the “CCA Independent
Committee”), established in connection with the
transactions and composed exclusively of independent directors of
Cogeco Communications, unanimously determined, after consultation
with its external independent legal and financial advisors, that
the repurchase of CCA SVS is in the best interests of Cogeco
Communications. National Bank Financial provided the CCA
Independent Committee with a fairness opinion stating that the
consideration to be paid by Cogeco Communications to repurchase CCA
SVS is fair from a financial point of view to Cogeco
Communications. After receipt of the unanimous recommendation of
the CCA Independent Committee, the repurchase of CCA SVS was
unanimously approved by the board of directors of Cogeco
Communications.
A favorable decision was obtained from the
Autorité des marchés financiers to exempt the Corporations from the
issuer bid requirements under applicable securities legislation
with respect to the repurchases of CGO SVS and CCA SVS by Cogeco
and Cogeco Communications, respectively.
The repurchases of CGO SVS by Cogeco and CCA SVS
by Cogeco Communications are expected to be completed on December
13, 2023.
ABOUT COGECO AND COGECO COMMUNICATIONS
Rooted in the communities it serves, Cogeco Inc.
is a growing competitive force in the North American
telecommunications and media sectors, serving 1.6 million
residential and business customers. Its Cogeco Communications Inc.
subsidiary provides Internet, video and phone services in Canada as
well as in thirteen states in the United States through its
business units Cogeco Connexion and Breezeline. Through Cogeco
Media, it owns and operates 21 radio stations primarily in the
province of Québec as well as a news agency. Cogeco's subordinate
voting shares are listed on the Toronto Stock Exchange (TSX: CGO).
The subordinate voting shares of Cogeco Communications Inc. are
also listed on the Toronto Stock Exchange (TSX: CCA).
ABOUT CDPQ
At CDPQ, we invest constructively to generate
sustainable returns over the long term. As a global investment
group managing funds for public pension and insurance plans, we
work alongside our partners to build enterprises that drive
performance and progress. We are active in the major financial
markets, private equity, infrastructure, real estate and private
debt. As at June 30, 2023, CDPQ’s net assets totalled
CAD 424 billion. For more information,
visit cdpq.com, consult
our LinkedIn or Instagram pages, or follow us
on X.
FORWARD-LOOKING STATEMENTS RELATED TO COGECO AND COGECO
COMMUNICATIONS
Certain statements contained in this press
release may constitute forward-looking information within the
meaning of securities laws. Forward-looking information may relate
to the Corporations’ future outlook and anticipated events,
business, operations, financial performance, financial condition or
results and, in some cases, can be identified by terminology such
as "may"; "will"; "should"; "expect"; "plan"; "anticipate";
"believe"; "intend"; "estimate"; "predict"; "potential";
"continue"; "foresee", "ensure" or other similar expressions
concerning matters that are not historical facts. Particularly,
statements regarding the completion and timing of the transactions
described herein, their anticipated benefits and the financing
thereof, as well as anticipated credit ratings following the
transactions, and statements regarding the Corporations’ objectives
and strategies are forward-looking statements. These statements are
based on certain factors and assumptions including the settlement
of the transactions and completion of the related financing
arrangements within the intended timing and on the terms described
herein, and more generally expected growth, results of operations,
purchase price allocation, tax rates, weighted average cost of
capital, performance and business prospects and opportunities,
which each Corporation believes are reasonable as of the current
date. Refer in particular to the "Corporate objectives and
strategies" and "Fiscal 2024 financial guidelines" sections of each
Corporation’s 2023 annual Management's Discussion and Analysis
("MD&A") for a discussion of certain key economic, market and
operational assumptions we have made in preparing forward-looking
statements. While management considers these assumptions to be
reasonable based on information currently available to the
Corporations, they may prove to be incorrect. Forward-looking
information is also subject to certain factors, including risks and
uncertainties that could cause actual results to differ materially
from what the Corporations currently expect. These factors include
risks such as general market and other conditions, competitive
risks (including changing competitive ecosystems and disruptive
competitive strategies adopted by our competitors), business risks,
regulatory risks, technology risks (including cybersecurity),
financial risks (including variations in currency and interest
rates), economic conditions (including inflation pressuring
revenue, reduced consumer spending and increasing costs), talent
management risks (including highly competitive market for limited
pool of digitally skilled employees), human-caused and natural
threats to the Corporations’ network (including increased frequency
of extreme weather events with the potential to disrupt
operations), infrastructure and systems, community acceptance
risks, ethical behavior risks, ownership risks, litigation risks
and public health and safety, many of which are beyond the
Corporations’ control. Moreover, Cogeco’s radio operations are
significantly exposed to advertising budgets from the retail
industry, which can fluctuate due to changing economic conditions.
For more exhaustive information on these risks and uncertainties,
the reader should refer to the "Uncertainties and main risk
factors" section of each Corporation’s 2023 MD&A. These factors
are not intended to represent a complete list of the factors that
could affect the Corporations and future events and results may
vary significantly from what management currently foresees. The
reader should not place undue importance on forward-looking
information contained in this press release which represent the
Corporations’ expectations as of the date of this press release (or
as of the date they are otherwise stated to be made) and are
subject to change after such date. While management may elect to do
so, the Corporations are under no obligation (and expressly
disclaim any such obligation) and do not undertake to update or
alter this information at any particular time, whether as a result
of new information, future events or otherwise, except as required
by law.
All amounts are stated in Canadian dollars unless otherwise
indicated.
FOR INFORMATION:
Investors |
|
Patrice OuimetSenior Vice
President and Chief Financial OfficerCogeco Inc. and Cogeco
Communications Inc.Tel.: 514-764-4600patrice.ouimet@cogeco.com |
Troy CrandallHead, Investor
RelationsCogeco Inc. and Cogeco Communications Inc.Tel.:
514-764-4700troy.crandall@cogeco.com |
|
|
Media |
|
Marie-Hélène LabrieSenior Vice
President and Chief Public Affairs,Communications and Strategy
OfficerCogeco Inc. and Cogeco Communications Inc.Tel.:
514-764-4600marie-helene.labrie@cogeco.com |
|
_______________________________
1 The Pro Forma numbers of shares outstanding give effect to the
transactions described above as if all such transactions had
occurred on December 11, 2023.
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