Cogeco Cable Inc, the main unit of media and telecom company Cogeco Inc, will buy Peer 1 Network Enterprises Inc for about C$526 million ($532 million) to expand its cloud computing and data hosting business.
Cogeco Cable (Montreal, Canada), which provides cable-TV, high-speed internet and telephone services, has been looking to increase its presence in the fast-growing data-center business due to tough competition in signing up new television customers in Canada.
The Montreal-based company, which competes with Rogers Communications Inc (Toronto, Canada) and Telus Corp (Burnaby, Canada), bought cable operator Atlantic Broadband (Quincy, USA) for $1.36 billion earlier this year to gain a foothold in the larger U.S. market.
Through the acquisition of Peer 1 (Vancouver, Canada), Cogeco Cable will add 19 data centers to the six it operates as demand for web hosting services rises mainly from small and mid-sized businesses.
Data centers house large-capacity server computers and data-storage systems which are connected to the Internet via high-bandwidth links.
Cogeco Cable's data hosting business is expected to rise 10 percent per year organically, the company said in its annual report earlier this year.
Vancouver-based Peer 1 is an internet infrastructure provider and specializes in managed hosting, dedicated servers, cloud services and co-location. Its customers include Wordpress.com (San Francisco, USA) and Virgin Gaming (Toronto, Canada).
Cogeco Cable offered C$3.85 for each Peer 1 share, which represents a premium of 30.5 percent to Peer 1 stock's closing price on Thursday.
The offer will be open for 35 days, and Cogeco Cable will receive a termination fee of C$18.5 million if the deal is not completed.
Cogeco Cable was advised by National Bank Financial.
Peer 1 shares closed at C$2.95 on the Toronto Stock Exchange on Thursday. Cogeco Cable's shares, which have lost 13 percent of their value over the last six months, closed at C$40.97.
(Reporting by Maneesha Tiwari; Editing by Don Sebastian)