French billionaire Patrick Drahi faces opposition to his plan to buy out minority shareholders in Altice Europe, after hedge fund Lucerne Capital Management said his offer is opportunistic and significantly undervalues the telecoms company.

Earlier in September, Patrick Drahi signaled his intention of taking Altice Europe private, offering €2.5 billion (US$2.9 billion) to buy out minority shareholders of the indebted telecoms company.

Figure 1: Rebel rebel: A rogue shareholder has accused Patrick Drahi of using the coronavirus pandemic to buy out minority shareholders at a discount.
(Source: Ecole polytechnique on Flickr CC 2.0)

The cash offer of €4.11 ($4.82) per share is being made by Next Private, Drahi's holding vehicle.

Lucerne Capital, which manages funds that own about €94 million ($110 million) of shares in Altice Europe, said it has "deep concern" about the all-cash offer.

As well as undervaluing the company, the hedge fund said the offer "is structured in a way that neglects the rights of Altice Europe minority shareholders."

In a letter sent to the Altice Europe board, Lucerne Capital said the offer price in no way reflects the true value of the company, "and in fact includes a significant discount rather than a premium" and is designed to squeeze out minority investors.

On the upside
The shareholder accused Drahi of using "the temporary lull in the share price, caused by COVID-19, to unlock the huge upside in value for himself and others with equity exposure only, to the detriment of the minority shareholders."

Lucerne also pointed to the potential for the minimum acceptance level of 95% to be waived and an information imbalance between Drahi and other investors.

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A report by Bloomberg noted that Altice has not yet responded to a request for comment.

Drahi previously insisted that the proposed ownership structure "will enable an increased focus on executing our long-term strategy, and underlines my confidence and conviction in Altice Europe's prospects."

As things stand, the transaction is expected to close in the first quarter of 2021, after which Altice Europe will be delisted from the Amsterdam stock exchange. Drahi plans to fund the buyout through a term loan credit agreement with BNP Paribas.

Altice was listed on the Amsterdam stock exchange in 2014. It later split off its US business into a newly listed vehicle, Altice USA. In June this year, the company sold off its remaining stake in Altice USA.

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— Anne Morris, contributing editor, special to Light Reading