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26 COGECO CABLE INC. 2006 Management’s Discussion and Analysis
INVESTING ACTIVITIES
ACQUISITION OF CABOVISÃO – TELEVISÃO POR CABO, S.A.
On June 2, 2006, the Corporation entered into an agreement with Cable Satisfaction International Inc. (“CSII”), Catalyst
Fund Limited Partnership I and Cabovisão, to purchase, for a total consideration of €465.7 million, all the shares of the
second largest telecommunications company in Portugal, an indirect wholly-owned subsidiary of CSII. The price includes
the purchase of senior debt and reimbursement of certain other Cabovisão liabilities. The acquisition was completed on
August 1, 2006. The fi nal purchase price will be determined following completion of a post-closing working capital adjustment.
The Corporation is assuming a €20 million working capital defi ciency of Cabovisão. The acquisition was accounted for using
the purchase method. The results of Cabovisão have been consolidated as of the acquisition date.
The preliminary allocation of the purchase price of the acquisition is as follows:
(amounts are in thousands of dollars) $
CONSIDERATION
PAID
ESTIMATED SHARE PURCHASE PRICE 304,188
SECURED LENDERS DEBT AND CERTAIN SPECIFIED CABOVISÃO LIABILITIES 274,761
ACQUISITION COSTS 4,193
583,142
AMOUNTS OUTSTANDING
PRELIMINARY WORKING CAPITAL ADJUSTMENT 2,432
585,574
NET ASSETS ACQUIRED
CASH AND CASH EQUIVALENTS 5,711
RESTRICTED CASH 489
ACCOUNTS RECEIVABLE 16,570
PREPAID EXPENSES 1,324
FIXED ASSETS 287,652
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES ASSUMED (65,282)
OTHER SPECIFIED CABOVISÃO LIABILITIES ASSUMED (91,914)
154,550
EXCESS OF CONSIDERATION OVER NET ASSETS ACQUIRED 431,024
PRELIMINARY ALLOCATION OF EXCESS OF CONSIDERATION OVER NET ASSETS ACQUIRED
PRELIMINARY GOODWILL 431,024
In order to fi nance the cash component of the transaction, the Term Facility and the operating line of credit of the
Corporation were restructured by an amended and restated credit agreement (see note 10 a) of the consolidated fi nancial
statements of the Corporation on page 52).
Management is currently carrying out a more specifi c analysis and changes will be made to the allocation of the excess of
consideration over net assets acquired as the information becomes available. For example, since the measurement of the
fair value of fi xed assets had not yet been completed at the time of the preliminary allocation, fi xed assets have been
presented at cost. The measurement of indefi nite and fi nite-lived intangible assets is also under way. Furthermore, in
accordance with CIRC, accumulated tax losses cannot be deducted if the ownership of at least 50% of the social capital
changes from the moment when the tax losses were generated, unless a request is fi led before such change in the
ownership takes place subject to approval by the Portuguese tax authorities. To this effect, a request for preservation of tax