Altice to buy Vivendi's SFR for €17B

Vivendi ended speculation over the future of its French telecoms business SFR, announcing over the weekend that it will sell the unit to cable and telecoms company Altice and its French cable unit Numericable for a total value of €17 billion ($23 billion).

 SFR, Altice, Bouygues, Orange, Vivendi

Altice founder Patrick Drahi
Copyright: Aude de Cazenove REA

The decision ends a month-long battle between Altice and Bouygues and is a major victory for Altice founder and chairman Patrick Drahi. Altice will pay €13.5 billion as well as a potential earn-out of €750 million, and give Vivendi a 20 per cent stake in the combined SFR Numericable. The price is higher than Altice's original offer of €11.75 billion payment and a 32 per cent share in the equity of the combined listed entity.

"This should represent a total value in excess of €17 billion," Vivendi said.

Altice also said it would increase its stake in Numericable from 40 per cent to 74.6 per cent through the acquisition of a 21.32 per cent stake from Carlyle Cable Investment and 13.27 per cent from Cinven in exchange for cash and shares in Altice.

Following these transactions, Altice will own 60 per cent of the new SFR Numericable, and said it will carry out a rights issue of €4.7 billion to fund the purchase. The company added that it may also consider raising up to an additional €550 million in equity to help finance the overall transaction.

"By bringing together SFR and Numericable we will create the French champion in very high speed broadband and in the convergence of fixed and mobile networks," said Drahi. "This is a trend throughout the sector, borne out across Europe and around the world. Our project, which is founded upon perfectly complementary networks and skillsets, will generate strong growth, which in turn will create jobs and stimulate investment."

Drahi will be chairman of the SFR Numericable board, and the company will remain headquartered in France and listed on the Paris stock exchange.

Vivendi's decision will come as a blow to Bouygues, which has maintained pressure on the group to consider its offer over the past few weeks. After improving its offer on Friday to €15 billion plus a 10 per cent share for Vivendi in the merged company, Bouygues upped its offer again over the weekend to €15.5 billion plus a 5 per cent share.

At the same time, Bouygues acknowledged the decision by Vivendi's supervisory board, and noted that it opens up a new period of exclusive negotiations for Altice.

Vivendi said it carefully reviewed all offers as well as letters and documents sent by Bouygues to the supervisory board in connection with the proposed merger of SFR with Bouygues Telecom. The bid by Bouygues has also been a clear favourite for French government officials as well as Orange. A combined SFR-Bouygues Telecom would reduce the number of mobile operators in France from four to three and limit what Industry Minister Arnaud Montebourg had called "destructive competition" on the market.

However, Vivendi said its supervisory board decided unanimously to select the Altice/Numericable offer as it "corresponds to the industrial project offering the highest growth potential, generating the highest value for its customers, employees and shareholders, while best meeting Vivendi's objectives." The group also noted that the decision puts an end to the plan to demerge SFR from Vivendi.

The fact that the Altice/Numericable offer presents the lowest risk of encountering regulatory objections was also a major factor in Vivendi's decision. "SFR and Numericable are not present on the same market segments and their activities are complementary," the company noted.

Vivendi said it will now consult its works councils on the plan presented by Altice/Numericable and begin procedures to obtain authorisations from the relevant administrative authorities. It will provide the next update on the transaction at the shareholders' meeting on June 24.

For more:
- see this Vivendi announcement
- see this Altice announcement
- see this Bouygues announcement

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