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Report: Could Cogeco be in play?

Fri, 07/08/2011 - 8:15am
The Canadian Press

MONTREAL – Despite its problems in Portugal, Cogeco Cable's strong operating results in Canada could eventually make it a takeover target by a large cable rival, an industry analyst said Friday.

Joseph MacKay of Mackie Research says Canada's fourth-largest cable company would be coveted by larger players because of its continued strong 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 Communications and Shaw Communications.

Montreal-based Cogeco reported Thursday that its revenues grew by 7.4 percent to $342.9 million in the third quarter despite challenges in Europe.

Growing subscribers in Canada boosted revenues by 8.6 percent to $299.3 million. Pre-tax operating (EBITDA) margins reached 42 percent, or $144.1 million.

It 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 write-down in 2009, three years after it entered the market with the 465 million Euro (C$664 million at 2006 exchange rates) of the Portuguese operations.

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, cell phone and Internet services.

But instead of selling, Cogeco said it wanted to be an acquirer.

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.

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