High-tech firm sold by Enwin
City-owned Enwin utilities has sold MaXess Networx to Cogeco Cable just as the broadband telecommunications service provider was stemming its financial bleeding.
March 12, 2008
City-owned Enwin utilities has sold MaXess Networx to Cogeco Cable just as the broadband telecommunications service provider was stemming its financial bleeding.
While MaXess has lost money since its inception in 1999, it was projected to break even this year, according to the 2006 annual report.
In 2002 the company had $1.4 million in revenue, but it also lost $1.4 million. In 2006, the company with 12 employees made $3.3 million, but lost $618,000.
Coun. Alan Halberstadt said he was glad to be rid of a business that Enwin critics considered an albatross.
“We shouldn’t have gone into the business in the first place,” Halberstadt said. “We’ve lost money on the deal.”
Mayor Eddie Francis, who is chairman of Enwin Energy, couldn’t be reached for comment Tuesday.
However, in a news release issued by Cogeco, Francis praised the deal.
“The City of Windsor and Enwin Energy Ltd. are pleased that an experienced and successful cable operator with a good track record in the Windsor region is taking charge of MaXess’ customers. We are confident that businesses and public-sector organizations will be able to grow with a partner like Cogeco Cable,” Francis said.
It was a good time to sell the property, said Victoria Zuber, chief financial officer of Enwin, the parent company that owns MaXess.
Growing revenues and declining losses create conditions “when you attract the best offer,” she said.
Four years ago Enwin’s board of directors told company executives to pare the utility conglomerate down to its core businesses, which are the electricity and water markets. While there have been negotiations with other companies, Cogeco — the second largest cable operator in Ontario and Quebec — offered the best price, Zuber said.
The sale is final March 31.
While the purchase price is confidential, the company was recently valued at $16.7 million. The secrecy provision was applied at the request of Cogeco because it’s a publicly traded company, Zuber said. The sale price will probably become public when Enwin files its 2008 annual report next year.
The sale of MaXess Networx will help pay down Enwin’s general debt and fund infrastructure renewal, Enwin spokeswoman Sylvia de Vries said.
The money will help pay for utility poles, wires, transformers and other equipment.
The sale was completed after the markets closed Monday, said Marie Carrier, director of corporate communications for Quebec-based Cogeco, which had $938 million in operating revenues last year.
“It’s a complementary network to the one we have,” Carrier said. “It really fits in well with our long-term strategy to serve our business customers.”
Despite yearly losses, Carrier said Cogeco bought MaXess because the cable giant was looking “at the long term, not short term.”
Most Windsor taxpayers will be unfamiliar with MaXess. Its subscribers are public groups such as school boards, hospitals, libraries and the University of Windsor. MaXess is a broadband telecommunications service provider that uses ATM and Ethernet technology. It also recently expanded service offerings to include network hosting, security and voice-over-Internet protocol. Its service area extends from Windsor to Grand Bend.
The Greater Essex County District School Board is one of MaXess’s biggest customers and the board recently signed a 10-year agreement with the struggling startup. MaXess is supposed to upgrade the existing wireless system to a wide area network.
The upgrade is to be finished within three years when the board starts paying $1 million — up from $400,000 — per year for the service.
“We have a legal contract with MaXess regardless of who owns it,” said Penny Allen, superintendent of business. “My understanding of contract law is we’ll be fine.”
One of the provisions in the new contract, which was also signed by the Windsor-Essex Catholic School Board, dictates that original subscribers who help pay to build the fibre optic network should see cost savings when more customers sign up for the service.
“If you bring in additional hospitals, there is a way that costs are redistributed so that the original group (who partially paid for the capital infrastructure) won’t be subsidizing costs for others,” Zuber said.
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