European telecoms investor Altice has completed its 70% acquisition of number seven cableco Suddenlink, cementing its entry into the US market. As it awaits regulatory approval to buy Cablevision, the fourth largest player, the private equity-like telco has set up a new division, Altice USA.
European telecoms investor Altice (AMS:ATC) has completed its 70% acquisition of number seven cableco Suddenlink, cementing its entry into the US market. The buyer has also agreed to buy Cablevision (NYSE:CVC), the fourth largest US cableco, for an enterprise value of US$17.7bn.
Selling the stake were existing shareholders BC Partners, CPP Investment Board and Suddenlink’s management, with the first two investors retaining 30% of the cable group. BC Partners and CPP have taken up the option to acquire 30%of Cablevision, alongside Altice.
The Suddenlink deal, which was agreed in May and values the company at US$9.1bn, received regulatory approvals on 18 December. Regulators are currently reviewing Altice’s proposed Cablevision buy.
The private equity-style telco became a poster child for the 2015 global M&A boom, but finishes the year with a share price that has fallen 80%. In early October, it was forced to downsize a financing package for Cablevision and clarify its capital structure.
Advisers have since become warier about leverage, which Altice said stood at 5.7x L2QA EBITDA as of 1 October.
“The share price suggested that they have passed their peak, and the market is nervous,” one banker said.
“Altice’s leverage is high, and it has no track record in the US. The market wanted to put money alongside [founder] Patrick Drahi because of his strong track record in Europe, but are they paying the right price for Cablevision? Why are the Dolans selling, having been shareholders for so long?”
“Altice is announcing target synergies based on those it hopes to achieve with Suddenlink. How will it achieve synergies that BC Partners, which knows the asset, could not carry out? Altice has no track record in the US, where ARPU is 2-3x higher and content costs two to three times as much [than in Europe].”
New US structure
Jerry Kent, Suddenlink’s outgoing founder, chairman and CEO, will reinvest alongside Altice into a new subsidiary, Altice USA. He will also become chairman of the unit’s newly formed advisory council, which will welcome more members later.
Altice CEO Dexter Goei will become executive chairman of Altice USA. The unit’s top management will comprise Charles Stewart as co-president and CFO, Hakim Boubazine as co-president and COO, while group COO Michel Combes will coordinate US operations with the rest of the group. (See Executive Moves story for further details.)
Suddenlink is the seventh largest US cable operator, with 1.45 million residential customers and over 90,000 business customers in 17 states, including Arizona, Arkansas, California, Louisiana, Missouri, North Carolina, Oklahoma, Texas, and West Virginia.
Raymond Svider, co-chairman and a managing partner of BC Partners commented: “We are delighted that the transaction with Altice has now closed, and look forward to the next chapter in Suddenlink working closely with Patrick [Drahi], Dexter [Goei] and their very experienced team.”
Goei said: “Altice is very excited to officially acquire its first asset in the United States and welcome Suddenlink and its employees to our international group. Suddenlink is a strong, leading business which we plan to continue to develop and grow through investment in infrastructure, innovation in technology and by integrating best practices from our brands around the world.
“We look forward to BC Partners and CPP Investment Board continuing as significant Suddenlink shareholders, and thank Jerry Kent and his team for delivering to us a best-in-class business. We also look forward to continuing to work with Jerry as an advisor and benefit from his deep knowledge of the US market.”
Altice, which describes itself as a multinational cable, fibre, telecom, content and media company, is present in four regions: Western Europe (France, Belgium, Luxembourg, Portugal and Switzerland), the US, Israel, and overseas territories (French Caribbean and Indian Ocean regions, and the Dominican Republic).
