Altice rumoured to be Vivendi favourite as Bouygues makes third bid

Bouygues tendered a third bid to acquire rival French mobile operator SFR on Friday--the day the board of SFR parent Vivendi board is expected to vote on a competing offer from Altice after three weeks of exclusive negotiations with the company.

The latest Bouygues bid includes an increased cash offer of €15 billion ($20.5 billion)--some €1.85 billion more than its previous tender--and a 10 per cent stake for Vivendi in the merged company. Bouygues said the latest offer values SFR at €16 billion before synergies, or €16.5 billion including synergies the company expects to generate in savings by disposing of its mobile network to Iliad-owned rival Free.

Although Bouygues is hoping that this latest offer will encourage the Vivendi board to turn down the Altice offer, previous reports said that Altice and Numericable, the cable operator that is 40 per cent owned by Altice, are still seen as the preferred bidders. That has a lot to do with fears that a merger of Bouygues Telecom with SFR would encounter too many regulatory hurdles since it would cut the number of mobile operators in the country from four to three.

Citing unnamed sources close to the talks, Bloomberg said Vivendi could choose to reach a final agreement with Altice on Friday, decide to proceed with talks with Bouygues, or reopen the bidding process.

When it announced on March 14 that it would hold exclusive talks with Altice, Vivendi said its supervisory board would meet again at the end of the three weeks to examine the next steps and to decide if it should put an end to the other options envisaged.

Altice's plan is to buy SFR and merge it with Numericable to create a new fixed and mobile powerhouse in France. Its offer to Vivendi currently comprises an €11.75 billion ($16 billion) payment and a 32 per cent share in the equity of the combined listed entity.

If Vivendi does vote in favour of Altice on Friday, it will bring to an end a month-long saga that has seen many twists and turns along the way as Bouygues and Altice battle to win the hand of SFR in order to strengthen their own positions in the French market. In a somewhat bizarre recent twist, Vivendi has also been forced to rebuff a new attempt by minority shareholders to get access to documents relating to the SFR sale after it rejected an earlier request for more transparency over the deal.

French financial markets regulator AMF has also called on Vivendi, Altice and Bouygues to provide more transparency in their talks on SFR, and fully meet rules of disclosure.

Bouygues has meanwhile been unrelenting in its efforts to scupper the Altice offer, despite being shut out of talks for the three-week period. Earlier this week, the construction and telecoms group extended the deadline for its offers to April 25, and also presented a break-up fee of €500 million should any eventual merger of Bouygues Telecom and SFR fail to complete for regulatory reasons. The latest offer of €15 billion also has a deadline of April 25.

Bouygues also previously said that Vivendi could choose between its original offer made on March 12 of €11.3 billion and a 43 per cent share in the merged entity, or an improved offer made on March 20 of €13.15 billion in cash and a 21.5 per cent stake in the merged entity.

If it fails to win through, Bouygues Telecom would be in a weakened position. The group had come to an agreement to sell its mobile network to Iliad should it gain approval to buy SFR, but without SFR, Bouygues Telecom would find itself increasingly under pressure from its larger rivals. The company had already been hard hit by Free Mobile's sub-€20 mobile plans launched in January 2012.

It's speculated that the company's telecoms unit will end up merging with Iliad whatever the outcome.

Brief recap on SFR timeline:
November 27 2013: The Vivendi supervisory board agreed unanimously to a demerger of SFR from Vivendi in order to focus on the group's media and content business.

January 8 2014: Altice announced plans to raise around €750 million through its initial public listing, preparing the way for further acquisitions.

January 21: Speculation intensifies that Vivendi is considering selling SFR to Altice and Numericable.

February 2: Bouygues Telecom and SFR agree on a mobile network-sharing deal.

February 3: Altice raises €1.3 billion from its IPO and lays out plans for further acquisitions.

February 13: Vivendi enters exclusive talks with Belgacom on buying Telindus France.

February 28: Bouygues is rumoured to have hired banks to advise it on a potential acquisition of SFR.

March 5: Vivendi sets a deadline for all potential SFR bidders to show their hand.

March 6: Vivendi confirms it has received bids for SFR from Bouygues and Altice/Numericable. The bid from Altice included around €11 billion in cash and granted Vivendi a 32 per cent stake in the new company.  Bouygues offered €10.5 billion in cash and 46 per cent of the new entity.

March 10: Bouygues said it had reached an accord to sell its mobile network and some frequencies to Iliad if its offer to merge Bouygues Telecom with SFR is approved.

March 12/13: Bouygues and Altice both sweeten their offers to €11.3 billion/43 per cent stake and €11.75 billion/32 per cent stake respectively.

March 14: Vivendi enters into exclusive negotiations with Altice on the acquisition of SFR for a period of three weeks.

March 21: Bouygues raises the cash part of its offer by €1.85 billion

March 28: French financial markets regulator AMF calls on Altice, Vivendi and Bouygues to provide more transparency in their talks on SFR.

April 1: Bouygues extends its original and improved offered to April 25 and offered to pay a break-up fee of €500 million should any eventual merger of Bouygues Telecom and SFR fail to complete for regulatory reasons.

April 4: Three-week exclusive period granted to Altice comes to an end; Bouygues makes third bid with a cash offer of €15 billion.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Bloomberg article
- see this Bouygues statement

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