The Southwood Group observes Numericable SA and its main shareholder Altice SA as they are reportedly preparing an offer with a valuation of $20 billion to merge with the much sought after Vivendi SA’s French telecommunications unit SFR.
Hong Kong, March 6, 2014 - (PressReleasePoint) -
The planned bid for SFR will reportedly be comprised of about $15.2 billion in cash, €3 billion worth of Numericable’s cable based assets and a €750 million capital injection from Altice and although no formal offer has yet been made, Patrick Drahi, the billionaire who controls both Altice and Numericable, has sought and received guarantees from lenders for some €8 billion of debt ahead of any confirmed deal. Vivendi, which gained full control of SFR in 2011, paid Vodafone Group Plc about €8 billion for its 44% stake, giving the carrier an €18 billion valuation at the time.
For Vivendi, accepting a sale of SFR would mean the abandoning of a much speculated spinoff of what is France’s second largest mobile phone company as its parent company focuses on media investment. SFR, which has in recent times become the subject of an intense three way battle for control between Numericable, Iliad SA and Bouygues SA, all discussing potential takeover offers, although Vivendi is expected to keep a minority holding in any merged entity.
“While it’s been known for some time that Vivendi is looking to move away from telecoms and focus on its media business, most were assuming that SFR would be spun off, but this rush of serious offers the company is receiving at the moment may be too tempting for Vivendi to pass up, especially at a $2 billion profit which they can surely earmark for other projects in a heartbeat,” said Martin Pearce a research and development strategist at The Southwood Group.
A merger of Vivendi’s telecom SFR with the broadband provider Numericable would keep the number of wireless network operators in France to four, with Orange SA, Bouygues and Iliad also running mobile networks in the country. French phone companies have been looking at consolidation for more than a year, in attempts to end a price war triggered by the entry into the market of Iliad in 2012, though to date this has not been achieved.
“Consolidation of the telecoms in France is an idea that fully supported by both the government and the industry, which is a reversal from the policy that caused Iliad’s entry and subsequent price war in the first place, It also stands in marked contrast to legislation in Germany which is making equally desired industry consolidation there all but impossible without serious concessions being made,” concluded Martin Pearce.
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