European telecommunications giant Altice NV has made a major move into the US market with a deal to buy fourth-largest operator Cablevision Systems Corp. for US$17.7 billion including debt.
Altice founder Patrick Drahi, who built a telecoms and cable empire via debt-fueled acquisitions in France, Portugal and Israel, is expected to apply his cost-cutting zeal to achieve a target of US$900 million in annual synergies at Cablevision, Reuters reported.
Drahi told a Goldman Sachs conference in New York that more than 300 Cablevision employees earn pay checks of over US$300,000 a year.
“This we will change,” said the French-Israeli billionaire.
Drahi entered the United States in May by buying a small, St Louis-based cable group called Suddenlink for US$9.1 billion.
He declared at the time that Altice would look for more acquisitions and eventually earn half its revenue from the US.
In talks that began in June, Drahi convinced Charles Dolan, the patriarch of the Irish-American family that owns Cablevision, to sell.
Cablevision has 3.1 million customers in New York, Connecticut and New Jersey, but it has struggled with declining video subscribers like other cable companies.
“This deal takes us into the most affluent part of the United States and will be a good basis for further expansion,” said Altice chief executive Dexter Goei on a conference call.
“We think there are significant ways to improve profitability by pooling purchasing and other costs between Cablevision and Suddenlink.”
Altice will pay US$34.90 in cash per share, a 22 percent premium to Wednesday’s closing price of US$28.54, giving Cablevision an equity value of US$10 billion.
Altice’s bid for Cablevision will face scrutiny from the Federal Communications Commission and the Department of Justice, but analysts at Jefferies said they expected “little pushback”.
Cablevision chief executive James Dolan said in a statement the time was right for new ownership and he and his family “believe that Patrick Drahi and Altice will be truly worthy successors”.
The Dolans will continue to own media and sports assets through AMC Networks and The Madison Square Garden Company — owner of the New York Rangers and New York Knicks — which are not part of the deal.
JP Morgan, BNP Paribas and Barclays have committed to finance the deal and also advised Altice on it. Cablevision was advised by Bank of America Merrill Lynch, Guggenheim Securities and PJT Partners.
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