Cogeco to buy Quebec-based triple-play provider DERYtelecom for $405 million

Cogeco Communications is buying DERYtelecom for $405 million to edge-out its footprint in Quebec. (Pixabay)

Cogeco Connexion, a subsidiary of Cogeco, will pick up about 100,000 triple play customers with its $405 million deal to buy DERYtelecom.

Both Cogeco and DERYtelecom are based in the province of Quebec, which means DERYtelecom's network assets are a good fit for Cogeco, according to Philippe Jetté, President and Chief Executive Officer of Cogeco Communications.

In a statement, Jetté also noted that the two service providers have a long history of "mutual respect, collaboration and friendship," which stood in sharp contrast to the unsuccessful joint takeover attempts of Cogeco and Cogeco Communications in September by Rogers Communications and Altice USA.

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Later in September, Rogers announced it would invest $3 billion (Canadian) in Quebec's telecom networks if its attempt to take over Cogeco were successful.

Cogeco estimated it could achieve about $3 million in operational savings over the first year after closing the deal for DERYtelecom, in addition to gaining  $40 million in tax benefits. The transaction is slated to close by February, subject to regulatory approvals.

DERYtelecom, which was founded in 1954 by Gilles Déry, is based in Saguenay, Quebec and offers internet, television and telephony services in over 200 municipalities across several regions in Quebec, including Estrie, Lanaudière, Montérégie and the Laurentians. Revenue and adjusted EBITDA for the fiscal year ended August 31, 2020 were estimated to be $105 million and $44 million, respectively. 

"As a Quebec-based company which is committed to its employees and its regional communities and with a history similar to ours, Cogeco presented itself as the best possible partner for us. This new beginning bodes well for the future of DERYtelecom, its clients and employees," said Bryan Godbout, president and general manager of DERYtelecom, in a statement.

With DERYtelecom in hand, Cogeco will leverage its product and sales teams in DERYtelecom's footprint to increase the subscriber base and deliver more revenue growth.

Cogeco said annual run-rate synergies of approximately $3 million would be realized gradually over the first year as operations are integrated and economies of scale are realized. 

Lastly, Cogeco said buying DERYtelecom would help the operator expand its rural footprint thorugh network extensions and government funding programs that were recently awarded to DERYtelecom.