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, 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 and Telus Corp, bought cable operator Atlantic Broadband for $1.36 billion earlier this year to gain a foothold in the larger U.S. market.
Through the acquisition of Peer 1, 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 and Virgin Gaming.
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)