Shaw Communications Inc. (SJR/B), a Canadian telecommunications and media company, agreed to acquire closely held ViaWest Inc. for $830 million to expand its technology offerings in western Canada.
Oak Hill Capital Partners LP is ViaWest’s majority shareholder. With the assumption of $370 million of ViaWest net debt, the deal has a value of $1.2 billion and represents about 13 times annualized adjusted earnings before interest, taxes, depreciation and amortization for the three months ended in June, Calgary-based Shaw said in a presentation today.
Shaw follows Cogeco Cable Inc. and Rogers Communications Inc. (RCI/B) by entering the fast-growing Internet storage sector through acquisitions. ViaWest’s management experience will be tapped to accelerate growth in western Canada, where it will compete with established data-center operators International Business Machines Corp. (IBM:US), Rogers, Telus Corp. and Open Text Corp.
The acquisition is a “significant step in expanding our technology offerings for mid-market enterprises in western Canada,” Shaw Chief Executive Officer Brad Shaw said in a statement.
The $1.2 billion price tag values the Denver-based company at the “higher end” when compared to similar transactions including Cogeco’s purchase of Web-hosting provider Peer 1 Network Enterprises in 2013, Dvai Ghose, director of research at Canaccord Genuity, wrote in a note to investors.
“We do not see any synergies between Shaw’s Canadian cable operations and ViaWest,” said Ghose, adding that the move suggests Shaw won’t enter the competitive mobile phone business and may push its shares lower in the near term.
Shaw fell 2.8 percent to C$26.72 at 4 p.m. in Toronto, the most in almost four months. The shares have gained 3.4 percent this year.
ViaWest has grown from five data centers in two markets to 27 centers in eight U.S. markets, including Dallas, Minneapolis and Las Vegas, in the past decade, Shaw said. It employs over 350 people and has more than 1,300 customers in seven states.
“The ViaWest assets represent an attractive geographic fit in that they are western based and represent a gateway for Shaw to attack the much-larger U.S. market,” Robert Goff, an analyst at Euro Pacific Canada, said in a telephone interview.
TD Securities Inc. provided financial advice to Shaw, which received legal advice from Davies Ward Phillips & Vineberg LLP and Simpson Thacher & Bartlett LLP. RBC Capital Markets LLC was financial adviser and Paul, Weiss, Rifkind, Wharton & Garrison LLP was legal adviser to ViaWest, according to today’s statement.
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