The gripping US cable operator M&A story revealed another unexpected plot twist Wednesday morning with the news that ambitious French communications giant Altice has agreed to buy a 70% stake in US cable operator Suddenlink in a deal that values the MSO at $9.1 billion.
To add to the intrigue, a Reuters report suggests that Altice has also held talks with Time Warner Cable Inc. (NYSE: TWC), which has been playing a lead role in the US cable market drama. (See Comcast Formally Ends Its Bid for TWC and Is TWC Sitting in Catbird Seat Now?)
In the meantime, Altice is aiming to close its takeover of Suddenlink Communications by the end of this year. It is buying a 70% stake from existing shareholders BC Partners, Canada Pension Plan Investment Board and Suddenlink management: BC Partners and CPP Investment Board will retain a 30% stake in the operator.
Altice says it is financing the deal with "$6.7 billion of new and existing debt at Suddenlink, a $500 million vendor loan note from BC Partners and CPP Investment Board and $1.2 billion of cash."
Altice shareholders like the deal, as the French company's stock leaped by 7.6% to €124.40 on the Amsterdam exchange in Wednesday morning trading.
Suddenlink, the seventh-largest cable operator in the US, has 1.5 million residential and 90,000 business customers in its key markets of Texas, West Virginia, Louisiana, Arkansas and Arizona. In 2014 it reported revenues of $2.3 billion and EBITDA (earnings before interest, tax, depreciation and amortization) of more than $900 million.
"With this acquisition, the Altice Group enters the large and attractive US cable market and takes a further step in diversifying and balancing its portfolio of high-quality businesses," said the French company in its official announcement of the deal.
"We are very excited about the acquisition of Suddenlink and are highly committed to continue to improve network investment, customer offers and service innovation in the attractive US market," noted Altice CEO Dexter Goei in the announcement. "Our investment in Suddenlink, our first in the cable sector in the US, opens an attractive industrial and strategic avenue for Altice in the US," a statement that suggests there's more Altice activity to come in the US.
The driving force behind the deal is Altice executive chairman Patrick Drahi, who has built an empire of telecom, cable and mobile operations in France, Belgium, Portugal, Switzerland, Israel, Luxembourg and the Dominican Republic. In 2014 Altice reported revenues of €13.5 billion ($15 billion), down 4.6% year-on-year, and EBITDA of €4.0 billion ($4.4 billion), down 6.3%.
Altice has been particularly active during the past year, having acquired French fixed and mobile network operator SFR to combine with cable operator Numericable and then making a successful bid to buy Portugal Telecom to combine with its existing Portuguese cable operator Cabovisão and business services player Oni. The acquisition of Portugal Telecom is set to close in the coming days. (See Eurobites: Altice Bids $8.8B for Portugal Telecom, Numericable-SFR Raises Profit Targets, Altice Picks Cisco for CCAP, DOCSIS 3.1 and Vivendi to Sell SFR to Altice/Numericable.)
Look out for further coverage of this deal and its ramifications on Light Reading.
For more on Suddenlink and the latest developments in the US cable sector, see:
- Charter, Bright House: The Wedding's Back On
- US Pay-TV M&A Plot Thickens
- Cablevision Chief Plays the Dating Game
- Comcast Seeks to Leave TWC Behind
- Bright House May Be Kingmaker
- Suddenlink Sounds Alarm for Smart Homes
- Suddenlink: We Still Love Video
- Suddenlink Switches on Home Automation
- Suddenlink Joins Gigabit Club
— Ray Le Maistre, , Editor-in-Chief, Light Reading