Determined not to lose the battle for SFR, conglomerate Bouygues has upped its cash offer for the French mobile operator by €1.85bn to €13.15bn (US$18.14bn).
This announcement comes almost a week after Vivendi, the parent of SFR, picked telecoms…
Determined not to lose the battle for SFR, conglomerate Bouygues has upped its cash offer for the French mobile operator by €1.85bn to €13.15bn (US$18.14bn).
This announcement comes almost a week after Vivendi, the parent of SFR, picked telecoms holding Altice, owned by billionaire entrepreneur Patrick Drahi, for exclusive talks until the beginning of April.
The decision was a harsh blow for Bouygues and its unit Bouygues Telecom, the third largest operator behind Orange and SFR, which has seen its market share decline in particular since Iliad’s Free Mobile made its debut in 2012.
Vivendi confirmed yesterday it has received the new Bouygues offer but reiterated that the exclusive negotiations with Altice run for a period of three weeks.
Earlier this month, Both Altice and Bouygues took part in a two-week bidding war in the hope of merging their respective units, cableco Numericable and wireless player Bouygues Telecom, with SFR.
Vivendi ultimately opted for the Altice proposal, which oᤙ6;ered the conglomerate €11.75bn in cash and a 32% share in the equity of a combined and listed Numericable-SFR entity. Bouygues had offered €11.3bn and a 43% interest in a merged Bouygues Tel-SFR.
In a statement yesterday, Bouygues said: “At its supervisory board meeting of 14 March 2014, Vivendi confirmed the relevance of Bouygues’ offer but considered the cash part to be insufficient. As a result, Bouygues is proposing to Vivendi to improve the cash part of its offer by €1.85bn, bringing it to €13.15bn, in addition to 21.5% of the new entity.”
The reduced stake in the combined company could also be a determinant factor for Vivendi, which has been looking to loosen its ties with SFR in order to focus on its media operations. Bouygues would own 67% of the new company.
As previously mentioned, Bouygues said in the release that “an IPO of the new entity is planned as soon as the merger is completed, thus giving Vivendi an immediate opportunity to monetise the remainder of its interest”.
To back its offer, the industrial and media group is bringing new partners into the project: the Caisse des Depots et Consignations, a state-controlled financial institution which already has a stake in Bouygues; the Pinault family, which owns several luxury brands; and outdoor advertising company JCDecaux, a shareholder in Bouygues. All three would hold shares in Bouygues Tel-SFR, which would become France’s largest mobile operator in terms of subscribers, ahead of incumbent Orange.
Bouygues also said the revised bid would have no impact on the debt of the new entity.
Besides offering €1.4bn more in cash than Altice, the group has several other trump cards.
Firstly, Bouygues Tel and SFR already have a network sharing agreement in place, which could facilitate a future combination.
Secondly, French industry minister Arnaud Montebourg did not hide his preference for a horizontal merger with Bouygues earlier this month, which would reduce the number of mobile players from four to three. In his view, such a deal would put an end to the ongoing price war and therefore eliminate the risk of jobs being cut.
Finally, Bouygues agreed early on to sell its network to France’s number four operator Free Mobile for €1.8bn in the case of a deal with SFR, in order to alleviate regulatory concerns.
But experts speculate that Vivendi specifically chose the Altice option because it was safer and faster than Bouygues’. The regulatory review of a merger with Bouygues would be more complicated given the significant antitrust implications of a horizontal merger compared to a merger with Numericable, which is a less direct competitor.
On top of that, a deal with already listed Numericable would make it easier for Vivendi to further cut its remaining stake in the merged entity quickly. In the scenario with Bouygues, a reduction would only be possible following a time-consuming IPO of the new player. The development of the stock market during that period could be an additional risk factor.
According to sources cited by French newspaper Le Monde, an agreement between Vivendi and Altice was imminent. Some industry observers had expected Bouygues to turn its attention instead to Free Mobile.
A few days ago, a banking source told TelecomFinance that Bouygues could either become a seller or continue trying to be a buyer and pointed to CEO Martin Bouygues’ ability to react quickly.
