Rogers Steps Up Its Stake In Cogeco

by Gaurav Kheterpal on November 5, 2010

Rogers Communications Inc. on Thursday raised its stake in Montreal-based Cogeco Cable Inc. and its parent Cogeco Inc. by paying out C$75 million.  Though Rogers now holds nearly 40 percent of the voting shares in its cable television rival, the country’s largest wireless company strongly denied any plans to take control of Cogeco & its cable arm.

The cable industry in Canada is currently going through a transition phase. Netflix launched in September this year and is threatening to be a game changer while Shaw picked up Canwest as an essential purchase amidst accusations of foul play by Telus. Though Rogers says it has “no current intention of acquiring ownership”, I can already sense an acquisition announcement coming sooner than later.

With this latest move, Rogers has now stepped up its stake in Cogeco by 19 percent and in Cogeco Cable by 9 percent. Rogers had a rather ordinary Q3 2010 by its high standards as profits slumped by 24%. In contrast, Cogeco and its cable arm last week reported a combined net income of C$52 million with a 0.3% rise in net profit and a 17.3% increase in adjusted net income. This move increase Rogers’s equity stake in Cogeco to 30 percent, and 20 percent for Cogeco Cable.

Rogers and Cogeco have an interesting history. In 2007, Cogeco Cable raised $346-million in capital investment though Rogers wasn’t even invited to participate in the equity offerings. In November last year, Rogers Communications paid $153 million for a stake in rival Canadian operator Cogeco and its cable subsidiary. It is interesting to note that Rogers eventually ended up paying far below the price that Cogeco Cable commanded when it sold stock back in 2007. Back then, The Globe suggested that these purchases “are part of a classic creeping takeover” and I’m certain that the situation hasn’t changed drastically from last year.

Rogers has a habit of using the term “for investment purposes only” far too often. Rogers made another high-profile acquisition in early October this year by snapping up Tria Networks LP, a large fibre optic network operator based in Kitchener, Ontario for C$425 million. With profits declining, it will be interesting to see if Rogers plans any more acquisitions in the coming months.

Though Cogeco and Cogeco Cable are still controlled by the Audet family, I’m pretty sure it’s a matter of time before Rogers takes over the reins.

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Written by: Gaurav Kheterpal. >. Follow > by: RSS>, Twitter >, >, or Friendfeed >

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