MONTREAL – Cogeco Cable’s controlling shareholders say they have no plans to sell the company despite suggestions that strong operating results in Canada make it an eventual takeover target.
“The position of the Audet family is very clear on the matter, Cogeco is not for sale,” Rene Guimond, vice-president of public affairs and communications at parent company Cogeco Inc., said in an interview Friday.
Cogeco Inc. (TSX:CGO) and the cable subsidiary are controlled by the Audet family through multiple voting shares, which make a hostile takeover unlikely.
Joseph MacKay of Mackie Research said Canada’s fourth-largest cable company would be coveted by large cable rivals, despite problems in Portugal because of its continued strong Canadian operating results, low valuation multiple relative to its peers and its focus on suburban Canada.
Among the potential buyers named in MacKay’s report were Rogers Communication (TSX:RCI.B) and Shaw Communications (TSX:SJR.B).
Montreal-based Cogeco reported Thursday that its revenues grew by 7.4 per cent to $342.9 million in the third quarter despite challenges in Europe.
Growing subscribers in Canada boosted revenues by 8.6 per cent to $299.3 million. It was helped by the addition of 52,534 revenue generating units, cost controls and rate increases implemented in April.
Get weekly money news
Adjusted earnings were 90 cents per share. That beat analyst expectations and last year’s 64 cents per share.
The company also wrote off the remaining investment in Cabovisao by taking a non-cash impairment charge of $225.9 million due to the weak economic environment in Portugal.
Cogeco took a $400 million writedown in 2009, three years after it entered the market with the euro465 million (C$664 million at 2006 exchange rates) of the Portuguese operations.
Cogeco Cable’s (TSX:CCA) attractiveness as a takeover target is helped by its low debt.
The company raised its annual dividend to 80 cents per share from 68 cents. Additional increases are likely because of its strong cash flow and low debt.
It’s not the first time that Cogeco Cable has been mentioned as a potential takeover target.
In 2000, it was expected to be the victim of rapid consolidation in the cable industry as telephone companies proceeded with convergence to offer a complete package of telephone, cable TV, cellphone and Internet services.
But instead of selling, Cogeco said it wanted to be a buyer.
After reporting its results Thursday, chief executive Louis Audet said the company has no plans to sell its Portuguese operations, which he said were purchased for the long-term.
With consumers looking to balance their household budgets, the focus will be to preserve, not grow, its subscriber base and improving margins so additional investments aren’t required.
Maher Yaghi of Desjardins Capital Markets said he doesn’t expect consolidation in the Portuguese market in the short-term.
“We believe a sale of Cabovisao could take place down the road when the players (Portugal Telecom and Zon Multimedia) decide to focus on profitability rather than pure market share gains,” he wrote in a report.
Yaghi said Cogeco Cable’s share price is below its intrinsic value.
While its subscriber growth has decreased since peaking in 2007, it should remain above the industry average as its markets are the least penetrated in the country, he added.
On the Toronto Stock Exchange, Cogeco Cable’s shares gained 83 cents or 1.9 per cent at C$44.48 in midday trading. Shares of Cogeco Inc. were up five cents at $43.04.
Comments
Want to discuss? Please read our Commenting Policy first.