Vivendi agrees to sell SFR to Altice in $23 billion deal3 min read . Updated: 06 Apr 2014, 09:40 AM IST
Vivendi to get 13.5 bn in cash now and 750 mn later and 20% of a company created from the merger
Paris: Vivendi SA agreed to sell SFR, France’s second-largest phone company, to Altice SA in a deal it said could value the business at more than €17 billion ($23 billion).
Altice and its billionaire owner Patrick Drahi will pay €13.5 billion in cash now and €750 million later and give Vivendi 20% of a company created from the merger of its Numericable Group with SFR, according to a statement from Vivendi. Vivendi said it will eventually sell the residual stake.
Bouygues SA, the construction and media conglomerate led by Martin Bouygues, offered €15 billion in cash and a 10% stake of an entity from combining SFR with Bouygues Telecom.
“At the end of deep discussions, the board decided unanimously to accept the offer from Altice/Numericable which was the industrial project most likely to bring growth, to create value for clients, employees, and shareholders, and responds best to Vivendi’s objectives," Vivendi said its statement.
Vivendi also said the sale to Altice would face fewer regulatory and antitrust obstacles.
While the French government has openly backed Bouygues, Vivendi said it has insisted that any buyer stick to employment promises that correspond to priorities fixed by the government.
“The Altice/Numericable industrial project is that which fully guarantees long-term employment growth, above all because of the investments it involves," the statement said.
By sticking to its preferred bidder Altice, Vivendi is ending a monthlong bidding war that threatened to delay its reorganization to focus on media. Chairman Jean-Rene Fourtou has promised to separate SFR from assets including Canal+, Universal Music Group and Brazilian broadband provider GVT. Shares of Vivendi have gained about 9% since the company said 27 November that shareholder Vincent Bollore would replace Fourtou at the end of the revamp.
For Drahi, the 50-year-old Altice chairman who made his fortune amassing cable assets, the transaction cements years of seeking to take over SFR, whose previous owners included Vodafone Group Plc. His cable empire spans from Portugal to Israel, and he saw through an initial public offering of Numericable in Paris in 2013 and Altice on the Amsterdam exchange earlier this year.
The transaction will require antitrust approval. Combining Numericable’s 1.7 million broadband users with SFR’s 21 million mobile-phone customers is unlikely to lead to an extended review because it would involve a merger of fixed-line with wireless assets, people familiar with the matter have said. That merger will also keep the number of mobile-network operators in France to four.
European competition commissioner Joaquin Almunia said 3 April it wasn’t clear whether France or the European Commission would review a sale of SFR.
No. 2 deal?
If the deal is completed, it could surpass Actavis Inc.’s agreement to buy Forest Laboratories Inc. by value, making it the second-biggest acquisition announced this year, according to data compiled by Bloomberg. Comcast Corp.’s bid for Time Warner Cable Inc. is the largest. An acquisition could also provide one of the biggest financing deals to loan bankers in Europe this year.
Bouygues’s offer had the support of French politicians, including industry minister Arnaud Montebourg as well as entrepreneur Xavier Niel, whose Iliad SA became the country’s fourth network operator in 2012 by offering discounted packages under the Free brand. French mobile prices have fallen more than 30% since.
The transaction also represents a milestone in European carriers’ push to merge in response to stricter regulations and increased competition. The European parliament this week voted in favour of plans to eliminate mobile roaming fees within the European Union.
Telefonica SA and Royal KPN NV are seeking the European Commission’s approval of the €8.55 billion combination of their German units to create the nation’s largest mobile-phone company by customers. Vodafone last month agreed to acquire Spanish cable operator Grupo Corporativo Ono SA in a €7.2 billion transaction.
After losing out to SFR, Bouygues’ best move may be to turn from buyer to seller by discussing a sale to Iliad.
For now, Bouygues’s failed bid also means Iliad will have to continue to deploy its own mobile network. Iliad had negotiated buying Bouygues’ wireless network for as much as €1.8 billion, on the condition that Bouygues would win SFR. Bloomberg
Matthew Campbell in London and Gregory Viscusi in Paris contributed to this story.