Quebecor Inc. is deepening its commitment to the business market with a $125-million deal to acquire Fibrenoire, a fibre-optic connectivity company.
Videotron Ltd., Quebecor's wholly owned telecommunications subsidiary, announced the transaction on Thursday, saying it acquired all the shares held by Fibrenoire's founding owners as well as those of its majority shareholder, private equity fund Novacap TMT.
The Fibrenoire deal is in line with Quebecor CFO Jean-François Pruneau's comments in September that the company's acquisition focus on the telecom side would be in the business services market. Last year, Videotron bought Quebec City data centre business 4Degrees Colocation for $31.5-million and said it would invest $40-million in a 4,000-square-metre data centre in Montreal.
Montreal-based Fibrenoire operates a 4,500-kilometre fibre-optic network in Toronto, Ottawa, Montreal and Quebec City and provides Internet and other business-related connectivity services to more than 1,000 clients in those cities.
Videotron CEO Manon Brouillette said in a statement on Thursday that the 4Degrees acquisition and the Fibrenoire deal "position us to meet growing business needs for cloud computing and connectivity, two highly complementary market segments."
Phillip Huang, telecom analyst with Barclays Capital Inc., said Videotron will finance the deal using credit facilities.
"We estimate Fibrenoire generates revenues of $30-million with 30 to 40 per cent EBITDA [earnings before interest, taxes, depreciation and amortization] margins, and is free-cash-flow positive," Mr. Huang wrote in a report on Thursday. He added that he sees "significant synergies" in the deal – and potential for margins to reach 70 per cent over time – as Fibrenoire currently leases network capacity from competitors such as BCE Inc. and Telus Corp. and will be able to migrate to Videotron's network.
Novacap invested in Fibrenoire in April, 2013, and said in a separate statement on Thursday that, over the past three years, the company has more than doubled its revenue and profitability.
Canadian telecom operators best known for serving residential clients are increasingly investing in the enterprise services market through data-centre, cloud-computing and connectivity services.
Also Thursday, Shaw Communications Inc. announced the opening of its 40,000-square-foot data centre in Calgary as well as a partnership with Microsoft that will enable it to offer a range of customized cloud computing options for businesses.