Network operator Altice is spinning off its US subsidiary and restructuring its European operation in a major overhaul aimed at reinvigorating the underperforming business.
Under the plans, the 67% stake that Altice holds in Altice USA will be distributed to existing shareholders, who will also receive a cash dividend of $1.5 billion before the completion of the spin-off, which is expected to happen in the second quarter of this year. (See Altice Unveils Group Reorganization.)
Altice's board has also authorized a new share repurchase program of $2 billion following the restructuring.
Outside the US, the company will operate three units under the Altice Europe name: Altice France, including the Numericable-SFR business, as well as assets in French overseas territories; Altice International, which will include its Portuguese, Dominican and Israeli subsidiaries; and an entirely new division called Altice Pay TV, which will look after content and sports rights.
The restructuring, it is hoped, will help the respective businesses to focus more clearly on their strategic objectives and lead to operational improvements.
"The separation will allow both Altice Europe and Altice USA to focus on their respective operations and execute against their strategies, deliver value for shareholders, and realize their full potential," said Altice founder Patrick Drahi in a statement.
Among other things, the move will ensure the separate businesses have dedicated management teams that can focus on very different regulatory and business challenges in the US and Europe.
Altice said there would be "simplified, more efficient and dynamic operating and financial structures with clear financial targets."
One thing that will not change is the controlling position of Drahi, who, as Altice's biggest shareholder, will be the chief beneficiary of the dividend payments and share repurchase program. Following the spin-off, Drahi will become the president of Altice Europe and the chairman of Altice USA.
Drahi, who owns 52.2% of the company, has built Altice into a major international player through a series of bold takeovers during the past few years. That acquisition strategy has proven costly: Debts have soared to about €49.6 billion ($59.2 billion), equal to more than five times Altice's annual EBITDA, while fierce cost cutting has hindered Altice's ability to compete in markets such as France.
For the third quarter of 2017, group revenues shrank by nearly 2%, to about €5.76 billion ($6.87 billion), compared with the year-earlier period. EBITDA rose 1.8%, to around €2.36 billion ($2.82 billion), over the same period.
Mounting concern about the company's debt profile has caused Altice's share price to fall by 57% since early June last year. At the time of publication, shares were up 5.8% in Amsterdam Tuesday, at €10, on news of the restructuring plan.
That restructuring firmly ushers in a new phase in Altice's story as Drahi turns his attention away from deal making and concentrates on operational improvements.
The new strategy could involve the divestment of assets not seen as core to Altice. The company last month said it had sold an Internet services company and data center business in Switzerland to InfraVia Capital Partners in a deal worth about 214 million Swiss francs ($218 million). According to the Financial Times (subscription required), it is also seeking a buyer for its network in the Dominican Republic, which has been incongruously lumped in with European assets under the restructuring announced today.
Today's move follows some reshuffling in mid-November that saw Drahi return to "active management" as president of the board as well as the resignation of Michel Combes from the position of CEO. (See Altice Moves to Stem Investor Panic.)
Dexter Goei, the CEO of Altice USA, was announced as Combes's replacement at the time, but he will now focus on the US business, which includes the Suddenlink and Cablevision businesses that Altice bought during its acquisition spree. Combes, of course, has resurfaced at Sprint. (See Sprint Appoints Ex-AlcaLu Boss Combes as CFO.)
Meanwhile, Altice CFO Dennis Okhuijsen will become CEO of the Altice Europe business comprising Altice France, Altice International and Altice Pay TV.
— Iain Morris, News Editor, Light Reading