COGECO CABLE ENTERS INTO AN AGREEMENT TO PURCHASE CABOVISÃO - TELEVISÃO POR CABO, S.A.
PRESS RELEASE
For immediate release
Cogeco Cable enters into an agreement to purchase
Cabovisão – Televisão por Cabo, S.A.
Montréal, June 2, 2006 – Cogeco Cable Inc., the second largest cable operator in both Ontario
and Québec and the fourth largest in Canada, has entered into an agreement with Cable
Satisfaction International Inc. (CSII), Catalyst Fund Limited Partnership I (Catalyst) and
Cabovisão-Televisão por Cabo, S.A. ("Cabovisão"), to purchase, at a cost of €464.9 million, all
the shares of the second largest cable operator in Portugal, an indirect wholly-owned subsidiary
of CSII. The price includes the purchase of senior debt and reimbursement of certain other
liabilities of Cabovisão. The agreed-upon purchase price for the shares and senior debt
corresponds to a multiple of 10.6 of operating income before amortization
1
for the first quarter
ended March 31, 2006 (annualized) and a multiple of 12.6 of operating income before
amortization over the last 12 months ended March 31, 2006. The final purchase price will be
determined following completion of a post-closing working capital adjustment. This acquisition is
in accordance with the external growth strategy announced by Cogeco Cable last October.
“Cabovisão is well positioned in the high-growth cable telecommunications market in Portugal,
including the Aveiro, the Lisboa-Palmela, the Caldas and the Alentejo regions. Cogeco Cable is
pleased with its growth potential and expects to make attractive additions to the services
already provided to its customers thanks to its modern distribution infrastructure. In addition,
Cogeco Cable will share with Cabovisão its knowledge of the cable distribution industry which it
has developed over the last 35 years and which will also foster stability in the ownership and
management of that company. Cogeco Cable believes that there will be continued growth in the
dynamic telecommunications market in Portugal. This acquisition is consistent with Cogeco
Cable’s pursuit of external growth opportunities in the past and enables the Corporation to take
part in the development of the cable telecommunications sector in Europe. In the future, Cogeco
Cable’s shareholders can expect management to use the same level of discipline and
seriousness with which the Corporation has secured growth and creation of value for its
shareholders in the past,” said Louis Audet, President and Chief Executive Officer of Cogeco
Cable.
1
Operating income before amortization or EBITDA is defined as net income before depreciation and amortization,
interest expense, income or witholding taxes and non-operating items such as restructuring charges. Operating
income before amortization is a standard measure used in the communications industry to assist in understanding
and comparing operating results and is often referred to by Cogeco Cable’s peers and competitors as EBITDA
(earning before interest, taxes, depreciation and amortization). Cogeco Cable believes this is an important measure
as it allows the Corporation to assess its ongoing business without the impact of depreciation or amortization
expenses as well as non-operating factors. It is intended to indicate Cogeco Cable’s ability to incur or service debt,
invest in capital expenditures or deferred charges and allows the Corporation to compare to its peers who may have
different capital structures. This measure is not a defined term under Canadian or Portuguese Generally Accepted
Accounting Principles (GAAP).
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The transaction is subject to usual conditions and to the obtaining of a further orders of the
Superior Court of Québec as part of the implementation of a plan of arrangement and
reorganization of CSII which has already been approved by the Court. A motion anticipated to
be filed later today with the Court for this purpose will be heard June 15, 2006. The
implementation of this plan and the sale to Cogeco Cable will enable Cabovisão to refocus on
its growth opportunities in the Portuguese market.
Cogeco Cable will finance the acquisition of Cabovisão through an underwritten credit facility of
$900 million over five years committed by Canadian Imperial Bank of Commerce. CIBC World
Markets has acted as financial advisor in connection with the proposed transaction. The total
debt ratio on Cogeco Cable’s consolidated EBITDA
1
following the acquisition of Cabovisão will
be 4.8 compared to 3.1 before this transaction.
Cabovisão – Televisão por Cabo S.A.
This company is a leader in cable telecommunications in its market, providing analog television,
high-speed Internet (HSI) and telephony services to approximately 611,000 revenue-generating
units and 820,000 homes passed in Portugal. Approximately 264,000 customers subscribe to
Cabovisão's analog television service,130,000 customers subscribe to HSI service and 217,000
subscribe to its telephony service.
Cabovisão’s distribution infrastructure is fully integrated and interconnected by a fibre optic
network connecting and servicing all areas of Portugal. The hybrid fibre optic and two-way 750
MHz coaxial cable network, built recently over a 10 year period, meets the DOCSIS 1.1
standard and reaches approximately 20% of all Portuguese households.
Cabovisão’s Financial Position
The company’s operating revenue was €129.3 million
2
for the fiscal year ended December 31,
2005. For first quarter 2006 ended March 31, 2006, revenue totalled €34.7 million
3
, a 12.6%
increase compared to the year-earlier period. Cabovisão’s EBITDA for its fiscal year ended
December 2005, stood at €34.5 million
2
and its annualized EBITDA for the first quarter ended
March 31, 2006, was €43.9 million
3
.
Cogeco Cable Inc. will hold a telephone conference to discuss this investment. Management’s
comments will be presented while taking into account the required sensitivity towards the Court
on issues raised.
The conference call will be held on June 2, 2006 at 14:00 Eastern Daylight Saving Time, and
will be rebroadcast live on Cogeco’s Web site: www.cogeco.ca/investors. The webcast will be
available until June 7. Members of the financial community will be able to access the conference
call and ask questions. Media representatives may attend as listeners only.
2
Audited financial data for Cabovisão – Televisão por Cabo, S.A. established according to Portuguese GAAP.
3
Non-audited financial data for Cabovisão – Televisão por Cabo, S.A. established according to Portuguese GAAP.
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Please use the following dial-in number to have access to the conference call by dialing 10
minutes before the start of the conference:
Canada/USA Access Number: 1 800 819-9193
International Access Number: +1 913 981-4911
Confirmation Code: 1483035
A rebroadcast of the conference call will be available until June 7 by dialing:
Canada and US access number: 1 888 203-1112
International access number: +1 719 457-0820
Confirmation code: 1483035
Certain statements in this press release may constitute forward-looking information within the
meaning of securities laws. Forward-looking information may relate to our future outlook and
anticipated events, our business, our operations, our financial performance, our financial
condition or our results and, in some cases, can be identified by terminology such as "will",
"should", "expect", "plan", "guarantee", "secure", "annualized", "potential", “believes” or other
similar expressions concerning matters that are not historical facts. In particular, statements
regarding our future operating results and economic performance and our objectives and
strategies are forward-looking statements. These statements are based on certain factors and
assumptions, including expected growth, results of operations, performance and business
prospects and opportunities, which we believe are reasonable as of the current date. While we
consider these assumptions to be reasonable based on information currently available to us,
they may prove to be incorrect. Forward-looking information is also subject to certain factors,
including risks and uncertainties (described in “Uncertainty and main risk factors” of the
Corporation’s 2005 annual MD&A) that could cause actual results to differ materially from what
we currently expect. These factors include technological changes, changes in market and
competition, governmental or regulatory developments, general economic conditions, the
development of new products and services, the enhancement of existing products and services,
and the introduction of competing products having technological or other advantages, many of
which are beyond our control. Therefore, future events and results may vary significantly from
what we currently foresee. You should not place undue importance on forward-looking
information and should not rely upon this information as of any other date. While we may elect
to, we are under no obligation (and expressly disclaim any such obligation) and do not
undertake to update or alter this information before next quarter.
This analysis should be read in conjunction with the Corporation’s financial statements and the
notes thereto prepared in accordance with Canadian GAAP and the MD&A included in the
Corporation’s Annual Report. Throughout this discussion, all amounts are in Canadian dollars
unless otherwise indicated.
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ABOUT COGECO CABLE
Cogeco Cable (www.cogeco.ca) is the second largest cable operator in both Ontario and
Québec, and ranks fourth in Canada in terms of the number of basic cable service customers
served. Cogeco Cable invests in state-of-the-art broadband network facilities, delivers a wide
range of services over these facilities with great speed and reliability at attractive prices, and
strives to provide both superior customer care and growing profitability to satisfy its customers’
varied electronic communication needs. Through its two-way broadband cable infrastructure,
Cogeco Cable provides its residential and commercial customers with analog and digital video
and audio services, high-speed Internet access as well as digital telephony service. The
Corporation provides about 1,464,000 revenue-generating units to approximately 1,462,000
households in its service territory. Cogeco Cable’s subordinate voting shares are listed on the
Toronto Stock Exchange (CCA).
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Source: Pierre Gagné
Vice President, Finance and Chief Financial Officer
Tel.: (514) 874-2600
Information: Marie Carrier
Director, Corporate Communications
Tel.: (514) 874-2600
Gilles Corriveau
Enigma Communications
Tel.: (514) 982-0308, extension 207