Altice acquisition of Cablevision for $17.7B to expand in the US

Altice Group, a European telecom company controlled by serial dealmaker Patrick Drahi, has agreed to buy U.S. cable operator Cablevision (CVC) in a deal valued at $17.7 billion including debt. Not including Cablevision’s debt, Altice will pay about $10 billion in cash, or $34.90 per share, for the Bethpage, N.Y. based Company that is controlled by the Dolan family.

The deal would create the fourth largest cable operator in the U.S. market with 4.6m customers in 20 states. The acquisition also includes Newsday Media Group, publisher of Newsday and amNewYork. The proposed deal will sever the Dolan family’s long ties with Cablevision. The deal doesn’t include the Madison Square Garden Company, which is also controlled by the Dolans and owns the New York Knicks and Rangers and their home arena in Manhattan. The family, which also has owned Cablevision since Charles Dolan, founded it in Long Island in 1973.

Yesterday, Mr Drahi and his team unveiled the terms of the Cablevision deal, which again showed the high price Altice is willing to pay and the significant leverage it is willing to take on to establish a footprint in the US market.

Altice said it would pay $34.90 a share in cash, valuing Cablevision’s equity at $9.6bn. The offer is a 22 per cent premium to Cablevision’s closing share price on Wednesday the 16th of $28.54.

Altice intends to finance the Cablevision acquisition by raising about $8.6bn of new debt and $3.3bn in cash, which will come from an Altice equity raising. The transaction will leave Cablevision with $14.5bn of net debt.

 

Mr Drahi said in a statement that the acquisition would reinforce his group’s presence in the US market. “We will be in a stronger position, as in all other markets in which we operate, to deliver the best services, invest in the most advanced technology and develop innovative products.

John Malone, the so-called “Cable Cowboy” and US billionaire behind Charter Communications and Liberty Global, beat Mr Drahi in May in a $78.7bn battle for Time Warner Cable. Since then the Franco-Israeli tycoon has also been rebuffed when Bouygues Telecom rejected a $10bn bid from Altice unit Numericable-SFR that would have consolidated the French telecoms market into three main operators.

In May, Altice, headquartered in the Netherlands, entered the U.S. by agreeing to buy cable operator Suddenlink Communications in a deal valued at $9.1 billion, including net debt. Drahi, Altice’s chairman, said a month later that he was not done dealing here and that he was interested in expanding the company’s revenue in the world’s largest TV and Internet market.

Despite the industry challenges triggered by cord-cutting and the TV revolution, broadband Internet growth remains strong as more consumers access all types of content over digital platforms. One of Cablevision’s advantages is that serves a premium media market, which is New York City. Altice is confident they could take out many cost synergies, which are estimated in $350 millionplus. The acquisition of Cablevision follows other deals that further consolidated the pay-tv industry in recent months. In merging with competitors, pay-tv operators are looking getting bigger and gain heightened bargaining power over broadcasters and TV networks that are demanding more money for their programming. By integrating Cablevision with Suddenlink and other possible future acquisitions, Altice stands to gain more leverage as it deals with U.S. networks for fees and digital content rights.

In June, AT&T completed its $48.5 billion acquisition of satellite TV provider DirecTV. In May, Charter Communications agreed to pay $55 billion to buy Time Warner Cable after Comcast’s bid to buy TWC was rejected by federal regulators. Cable industry legend John Malone sits on Charter’s board. And Malone’s company, Liberty Broadband, owns about 25% of Charter.

Like other pay-tv operators, Cablevision’s video business continues to lose customers, as they turn to online streaming. In August, Cablevision, which has about 3.1 million total customers, said the number of its cable TV subscribers shrank by 16,000 during the second quarter. Its Internet customers rose 14,000. Cablevision’s revenue for the quarter increased 1.6% to $1.65 billion. Altice, founded by Drahi in 2002, provides broadband Internet and pay TV to customers in France, Israel, Belgium, Luxembourg, Portugal, French West Indies, Indian Ocean Area, the Dominican Republic, and Switzerland.

Born in Morocco, Drahi is now one of the richest people in France after amassing his wealth in the cable business initially in France and eventually in other international markets. In leading up to its splashy entry in the U.S. market, Altice spent up to $28 billion in telecom deals in 2014 alone, according to The Wall Street Journal.

Massimiliano Coletto

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