Altice to buy Suddenlink Stake in $9.1 Billion U.S Cable Deal

Wednesday, May 20, 2015

Altice SA agreed to buy 70 percent of Suddenlink Communications as French billionaire chairman Patrick Drahi embarks on an expansion into the U.S.

The acquisition places an enterprise value of $9.1 billion on Suddenlink, the seventh-largest U.S. cable company, Altice said Wednesday. Altice, Drahi’s investment vehicle, has also made a takeover approach for larger Time Warner Cable Inc., whose merger with Comcast Corp. was called off last month, a person with knowledge of the matter said.

Drahi, 51, is seeking to expand his telecommunications empire to a U.S. cable market that is being quickly reshaped by a series of mergers. Cable providers are trying to get bigger as their traditional business of selling TV service comes under pressure from online rivals.

Last month, Comcast, the nation’s biggest cable company, dropped its plan to buy Time Warner Cable, the No. 2, in the face of regulatory hurdles. Meanwhile, Charter Communications Inc., which ranks fourth, is working on a takeover of Bright House Networks LLC, the No. 6. Many analysts also anticipate a merger between Charter and Time Warner Cable.

Shares of Altice rose 7.5 percent to 124.30 euros at 11:08 a.m. in Amsterdam. Suddenlink is closely held. Time Warner Cable added 0.3 percent to $158 in New York on Tuesday.

Bigger Deal?

Suddenlink would give Altice a foothold in the U.S. after a series of deals built it into a force in Europe’s telecommunications market. Suddenlink, based in St. Louis, has about 1.5 million residential and commercial customers in more than a dozen states, primarily in Texas, Oklahoma, Arkansas, Louisiana, North Carolina and West Virginia.

A purchase of Time Warner Cable, with more than 10 million video customers, would immediately vault Altice into a major force in the U.S. cable market. New York-based Time Warner Cable provides cable-TV, high-speed Internet and voice services to businesses and consumers.

Deliberations on a deal for Time Warner Cable are at an early stage and may not result in an agreement, the person with knowledge of the plan said. Time Warner Cable’s market capitalization is about $45 billion, while Altice has a value of $34 billion.

Drahi could also face competition from billionaire John Malone to acquire the asset. Advisers for Malone’s Charter have already reached out to Time Warner Cable to begin talks on an acquisition, people with knowledge of the matter have said.

Malone is a rival to Drahi in Europe through his Liberty Global Plc cable company.

Suddenlink Changes

Representatives for Time Warner Cable and Altice declined to comment. Reuters reported the approach earlier Tuesday, citing an unidentified person.

The Suddenlink deal marks a second change of ownership of the U.S. company in three years. In 2012, it was bought by BC Partners Ltd. and a Canada pension fund for $1.99 billion from a group of investors that included Goldman Sachs Group Inc. BC Partners and the Canadian fund, CPP Investment Board, will now retain 30 percent of Suddenlink.

JPMorgan Chase & Co., PJT Partners Inc. and BNP Paribas SA acted as financial advisers to Altice. Franklin, Covington, Mayer Brown and Ropes & Gray acted as legal advisers.

France Setback

Drahi, who splits his time between Paris, Geneva, and Tel Aviv, is expanding to new territory with the Suddenlink purchase. He is a dual French and Israeli citizen whose parents were math teachers and who prefers getting around on a bicycle.

Last year, Altice bought French wireless provider SFR and merged it with its own cable operator Numericable.

Early this year, Altice was stepping up plans for a potential takeover of smaller mobile carrier Bouygues Telecom to further cement its position in France, people familiar with the matter said at the time. Bouygues SA Chief Executive Officer Martin Bouygues said last month the company’s phone division isn’t for sale. Bouygues shares declined 1.6 percent in Paris.

Moroccan-born Drahi’s first cable venture was a tiny operator founded 20 years ago in the village of Cavaillon in southern France. Throughout the 1990s Drahi bought and sold cable companies, deals that eventually led to the creation of Numericable, alongside buyout firm Cinven Group Ltd. Carlyle Group LP invested in 2007 in Numericable, now France’s largest cable provider.