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Billionaires battle over France's SFR: Bouygues and Altice make their move

Bouygues and Altice are both hoping to get a stake in France's second largest telco and merge it with their own fixed and mobile businesses.
Written by Anne Morris, Contributor

Let battle commence: French telco SFR is now the subject of takeover bids by both Bouygues and Numericable shareholder Altice, as the two groups put into action their plans to buy the fixed and mobile telecoms unit owned by Vivendi.

It has been no secret that Vivendi wants to offload SFR as part of an overarching strategy to focus on its media business, and the company has worked of late to pave the way to spin off the operator from the group. Now, two bids each valuing SFR at around €14.5bn are on the table. It remains to be seen which of the pair will win through.

As things stand, Xavier Niel — the billionaire owner of Iliad, which owns mobile upstart Free — seems content to watch from the sidelines: Iliad had not made an offer by 8pm on Wednesday, which was the deadline set by an impatient Vivendi for potential bidders to show their hand. Niel is nothing if not unpredictable, however, and it's still not completely certain that this billionaire is out of the race.

Numericable's offer reportedly includes €11bn in cash and would give Vivendi a 32 percent share in the new company. Bouygues is offering €10.5bn in cash in return for 46 percent of the new company.

Altice wants to buy SFR to create a fixed and mobile behemoth in France by merging the company with its cable operator Numericable. So far, the money has been on Numericable winning the tussle over SFR because such a deal would present far fewer regulatory hurdles, and would avoid a reduction of the number of mobile operators in France from four to three.

In addition, billionaire Altice founder Patrick Drahi is a seasoned M&A player, having gradually built up Altice through the strategic acquisition of fixed and cable operators in Europe and the Caribbean.

Bouygues, well aware of the scrutiny it will face from antitrust regulators, has issued a manifesto on how it believes a consolidation of Bouygues Telecom and SFR will benefit the market, while also providing a good return for Vivendi.

First, the company has issued assurances that no compulsory redundancies will be necessary, and this will be key to winning over French approval. The group also estimates that annual cost savings of around €1.4bn will be possible.

Bouygues plans to create a new entity in which it would hold a 49 percent stake and Vivendi 46 percent. An initial public listing for the new entity would be carried out immediately after its formation, and Vivendi would be offered the opportunity to monetise a further 15 percent of the capital.

Bouygues estimates that its offer of €10.5bn in cash combined with the 46 percent stake and the other remaining synergies would ultimately give SFR a value of around €19bn.

"A merger between Bouygues Telecom and SFR would lead to the creation of a major French digital communications group that would be the benchmark provider of technologies in the home, with the best indoor and outdoor coverage nationwide and with a high performance mobile network on a par with the most advanced in the world," the Bouygues group said.

It said that the merger would create the largest mobile network operator in France ahead of Orange and the second-largest fixed operator. It would also be the seventh biggest sector player in Europe.

Another billionaire could have a decisive say in the matter — Vincent Bollore, the vice-chairman of Vivendi's board and its second-largest shareholder. Reports suggest he will have a great deal of sway over the final outcome.

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