Altice Queries Bouygues' Motives in Rejecting 10B Bid
Altice has complained that Bouygues' directors did not seek full details of its 10 billion (US$11.2 billion) offer for Bouygues Telecom before rejecting the deal earlier this week. (See Bouygues Says 'Non' to Altice and Altice Confirms Bid for Bouygues Telecom.)
Altice had planned to merge Bouygues Telecom , France's third-biggest mobile operator, with its own Numericable-SFR business, the number-two mobile player, but parent company Bouygues turned down the offer on Wednesday, insisting it could thrive as a standalone business in the French telecom market.
The suspicion is that Bouygues may have come under political pressure to reject the deal, with French economy minister Emmanuel Macron opposed to further consolidation in the country's telecom sector.
Bouygues claims it was concerned about the impact a takeover would have on jobs and plans for an auction of 700MHz spectrum, and reckons it can sharply increase its profit margins over the next couple of years as a standalone player.
But Altice suggests Bouygues raced to a decision without even examining the details of its bid. (See Altice Confirms Bid for Bouygues Telecom.)
"Altice takes note of the decision of the board of directors of Bouygues and regrets that the board has not once, either through its advisors or through its management teams, sought any details or explanations from Altice regarding the offer," the cable company said in a statement released late on Thursday.
Altice has also published full details of its offer, casting aspersions on the reasons Bouygues has provided for saying no to a deal.
Those details confirm that Altice had indeed offered as much as 10 billion ($11.2 billion) for Bouygues Telecom -- about twice as much as analysts reportedly believe the operator is worth.
Earlier reports had valued the offer at 10 billion ($11.2 billion) but Altice had not previously disclosed this figure in its public statements.
According to Altice's latest statement, the 10 billion ($11.2 billion) would have comprised a guaranteed cash payment of 9 billion ($10 billion) plus another 1 billion ($1.12 billion) in either cash or Numericable-SFR shares.
Contrary to earlier press reports, however, Altice had planned to fund the deal mainly through equity and not entirely through debt. Its intention had been to raise between 3.5 billion ($3.92 billion) and 4 billion ($4.48 billion) from asset sales and a capital increase and draw on cash reserves at Numericable-SFR for another 2.5 billion ($2.8 billion). The remainder of the fee would have been paid in debt.
Altice has also implied that Bouygues missed assurances in its offer about employment levels at Bouygues Telecom, pointing out that it had promised to respect similar conditions to those affecting its takeover of SFR last year.
Having since merged the mobile operator with Numericable, its broadband business, Altice claims to have realized major cost savings while "fully meeting its commitment to maintain employment."
It had also provided a commitment to the French government to participate in the 700MHz spectrum auction.
Authorities may have been concerned that Numericable-SFR would choose to sit out a 700MHz auction after successfully negotiating a takeover deal with Bouygues, reducing the number of auction participants from four to three and auction proceeds along with it.
That said, Arcep -- France's telecom regulator -- might be equally worried about an imbalance in the spectrum market should both operators secure new frequency licenses before merging. (See Altice's Bouygues Bid Creates 700MHz Confusion.)
There could also be skepticism about Altice's assurances on employment: This merger would, after all, have brought together two mobile operators with considerable overlap between their businesses.
Undoubtedly, there is less overlap between Numericable and SFR -- as fixed and mobile players respectively.
Altice said it had also promised to increase capital expenditure on the deployment of a fiber-to-the-home network, setting a target of 20 million homes passed by 2020 -- 5 million more than it had promised to cover by that date in 2014.
Iain Morris, , News Editor, Light Reading