€17bn offer sees SFR end up with Altice

The fight over the future of France's second biggest telco looks to be finally over, with Numericable's parent company walking away with the prize.
Written by Anne Morris, Contributor

After a month-long battle over SFR, Vivendi announced over the weekend that it has chosen Altice's offer, which came with a total value of €17bn.

Vivendi said that the Altice offer "corresponds to the industrial project offering, the highest growth potential, generating the highest value for customers, employees and shareholders, while best meeting Vivendi’s objectives".

It also noted that the offer brings the lowest risk to competition in the French telecoms market, as SFR and Altice's cable arm Numericable, don't currently operate in the same market segments and their activities are complementary.

The statement from the media and telecoms group, which confirmed that the original plan to demerge SFR has now been scrapped, also revealed that Altice sweetened its bid during its three weeks of exclusive talks with Vivendi.

Altice, which plans to merge SFR with Numericable to create a fixed and mobile powerhouse in France, originally offered €11.75bn and a 32 percent stake in the merged entity. It will now pay €13.5bn as well as a potential earnout of €750m, and award Vivendi a 20 percent stake in the merged entity. "This should represent a total value in excess of €17bn," Vivendi said.

Altice also said it will increase its stake in Numericable to 74.6 percent from 40 percent through the acquisition of a 21.32 percent stake from Carlyle Cable Investment and 13.27 percent from Cinven in exchange for cash and shares in Altice.

Altice will then own 60 percent of the new SFR-Numericable once the transactions are closed, and plans to carry out a rights issue of €4.7bn to fund the purchase.

"By bringing together SFR and Numericable we will create the French champion in very high speed broadband and in the convergence of fixed and mobile networks," Altice founder and chairman Patrick Drahi said. "This is a trend throughout the sector, borne out across Europe and around the world. Our project, which is founded upon perfectly complementary networks and skillsets, will generate strong growth, which in turn will create jobs and stimulate investment."

The fact that the Drahi was compelled to raise his offer during the negotiations in the last three weeks reflects how fraught the battle for SFR had become: indeed, both Altice and Bouygues had big plans for the operator as they sought to boost their respective positions in the French telecoms market.

For Bouygues, which increased its offer for the fourth time on Saturday to €15.5bn and a five percent share in a merged SFR-Bouygues Telecom, the decision will come as a blow.

Bouygues' offer also had the support of the French government, especially industry minister Arnaud Montebourg, and rival Orange, which would have welcomed a reduction in the number of mobile operators in France from four to three. Now, Orange will face a strong fixed and mobile rival in the form of SFR-Numericable.

As things stand, Bouygues has acknowledged the decision by Vivendi's supervisory board, outlined its improved offer and noted that a new period of negotiations has started for Altice. If the last month is anything to go by, it's unlikely that Bouygues is ready to admit defeat just yet.

Meanwhile, Vivendi said the next step will be to consult its works councils on the Altice/Numericable plan and begin the processes necessary to get approval for the deal from the relevant authorities. It will provide the next update on the transaction at its shareholders' meeting on 24 June.

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