Rogers swallows Videotron in $4.2 bil deal

MONTREAL — Rogers Communications, Canada’s top cable operator, has inked a deal to acquire Montreal-based Groupe Videotron, the third-largest cable company in the Great White North, for approximately C$6 billion ($4.2 billion) in stock.

It is one of the largest corporate takeovers in Canadian history and dramatically revamps the cable and telecommunications landscape in the country.

Rogers picks up 1.6 million customers from Videotron, giving Toronto-based Rogers a total customer base of 3.7 million. The newly merged entity will rank as the seventh-largest cable company in North America.

Many customers

It will service in the neighborhood of two-thirds of homes in the provinces of Ontario and Quebec and have a 44% market share in Canada, said execs at Rogers.

The combined worth of the two companies is $17 billion. The deal was announced in Montreal on Monday.

The new company will also have 260,000 high-speed Internet-access customers, ranking it among the top three suppliers in North America. Videotron has been one of the front-runners in Canada, in terms of developing high-speed Internet access, and this was a key reason for Rogers to make the mega-deal, said analysts.

Big player gets bigger

“Rogers is already one of the largest telecommunications players in Canada, and the one thing they did not have was Internet access,” said analyst John Grandy from Yorkton Securities. “I didn’t think (Videotron controlling shareholders) the Chagnon family were interested in selling. I think they were worried about the cost of developing new technology to stay ahead of the curve and that it was wise to share those costs with another player.”

Videotron has a controlling interest in TVA Group, Canada’s leading French-language broadcaster, but the TVA holdings are not included in the Rogers deal. TVA holdings will be distributed to Videotron shareholders, prior to the closing of the deal and, therefore, control of TVA Group will not change hands.

Rogers Communications CEO Ted Rogers said, “Through this agreement, we plan to offer our customers and Videotron’s (customers) the benefits of bundling, combining cable, telephony and video services with publications and wireless product, as well as the benefits stemming from our alliances with AT&T and Microsoft.”

Videotron CEO Claude Chagnon will be appointed vice chairman of the merged company, which will be controlled by Rogers.

“This merger will extend our vision to a larger market,” said Chagnon. “Our customers will benefit from the latest communications technologies and services available.”

In stock purchase deal, is set to pay 0.925 class-B non-voting shares of its stock, currently worth $30.85, for each Videotron share. Videotron’s shares rose 34¢ on Monday to close at $28.36 on the Toronto stock exchange, while Rogers class-B shares dipped $2.97 on Monday to close at $30.37 in Toronto.

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