Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Altice expands in U.S. with $17.7 billion Cablevision deal

Published 09/17/2015, 04:44 AM
Updated 09/17/2015, 04:44 AM
© Reuters. Patrick Drahi, Franco-Israeli businessman, Executive Chairman of cable and mobile telecoms company Altice and founder of Numericable arrives to attend a hearing at the French National Assembly in Pari

© Reuters. Patrick Drahi, Franco-Israeli businessman, Executive Chairman of cable and mobile telecoms company Altice and founder of Numericable arrives to attend a hearing at the French National Assembly in Pari

By Leila Abboud

PARIS (Reuters) - European telecoms group Altice will become a major force in the lucrative U.S. cable market after it agreed to buy fourth-largest operator Cablevision (NYSE:CVC) for a mix of cash and shares in a deal worth $17.7 billion including debt.

The move is the latest foray by French-Israeli billionaire and Altice founder Patrick Drahi, who built a telecoms and cable empire in recent years via debt-fueled acquisitions in France, Portugal and Israel.

Drahi entered the United States in May by buying small regional cable group Suddenlink for $9.1 billion and had declared he would do more acquisitions so as eventually to earn half of Altice's revenue there.

In talks that began in June, Drahi managed to convince Charles Dolan, the patriarch of the Irish-American family that owns Cablevision, to part with the asset they had long said they would not sell.

Altice will pay $34.90 in cash per share, a 22 percent premium on Wednesday's closing price of $28.54, and a person close to the company said it will finance the deal with $3 billion from a share sale and $7 billion in debt.

Cablevision has 3.1 million customers in the New York, Connecticut and New Jersey area.

Drahi is expected to apply his cost-cutting zeal to generate $900 million in synergies a year at Cablevision, but will have to contend with fast-changing competition as consolidation picks up among U.S. cable groups seeking to cope with changing customer viewing habits.

Video streaming services like Netflix (NASDAQ:NFLX) pose a threat to ad and subscription revenue, leading U.S. cable and satellite groups to suffer the largest subscriber losses ever in the second quarter.

"The acquisition of Cablevision represents Altice's next step in the U.S. market," Altice said in a statement. "Together both operators represent the fourth-largest cable operation in the U.S. market."

ALTICE SHARES RIDING HIGH

The transaction, which is expected to close in the first half of next year, is to be financed with $14.5 billion of new and existing debt at Cablevision, cash on hand at Cablevision and $3.3 billion of cash from Altice.

Two investment funds, BC Partners and CPP Investment Board, have also agreed to buy up to one-third of Cablevision to help pay for the deal.

Altice, whose corporate headquarters are in the Netherlands, said that as part of the financing, it would issue Class A shares, which have fewer voting rights than the B shares held largely by Drahi.

Altice created the dual-class structure in June so as to allow it to do more deals in shares without Drahi losing control.

Shares in Altice were up 3.4 percent at 25.16 euros by 0800 GMT after gaining nearly 13 percent at the open.

Investors who back Drahi's acquisition spree have made Altice Europe's best-performing telecom stock this year, up more than 50 percent before Thursday's deal, compared with an 8.4 percent rise in the sector index.

Altice, which has also been snapping up television and radio targets in Europe in recent months, will also become the owner of Newsday newspaper and local news channel News 12 Networks.

Gary Paulin of brokerage Aviate Global said Altice could benefit massively from applying its cost-cutting strategies at Cablevision.

"Cablevision is ripe for picking as it has the lowest margins of the four major U.S. players... so [large] efficiencies could be had if Altice execute in their normal manner," he wrote in a note, adding that Cablevision margins were 28 percent compared with U.S. cable average of 35 percent. 

© Reuters. Patrick Drahi, Franco-Israeli businessman, Executive Chairman of cable and mobile telecoms company Altice and founder of Numericable arrives to attend a hearing at the French National Assembly in Pari

JP Morgan, BNP Paribas (PARIS:BNPP) and Barclays (LONDON:BARC) have committed to finance the deal and also advised Altice on it. Cablevision was advised by Bank of America Merrill Lynch (NYSE:BAC), Guggenheim Securities and PJT Partners.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.