Altice and its US offshoot Altice USA are in the initial stages of putting together an offer to acquire number two US cable operator Charter Communications, according to various reports.
According to CNBC, which first reported the move, citing unnamed sources, Altice is working with banks to finance a possible deal, which would involve a mix of cash and shares. According to CNBC, a bid is likely, although there is no guarantee that Altice will move forwards. While Altice would seek to finance a large part of the deal with debt, it is less clear that John Malone, whose Liberty Media owns 20.5% of Charter, and 25% of the voting rights, would be prepared to accept an offer with a large stock element.
According to the Financial Times, citing sources close to Altice, the cable and telecom group is working on a US$185 billion bid.
Such a deal would be Altice boss Patrick Drahi’s biggest to date. Charter is currently worth over US$180 billion including debt, with a stock market value of about US$121 billion. Altice is valued at around US$32 billion, while Altice USA has a market capitalisation of around US$23 billion. Both are heavily indebted already.
Charter beat Altice to take control of Time Warner Cable last year in a deal that valued the latter at US$78.7 billion, folding Bright House Networks, another operator it was acquiring at the same time, into the combined entity.
Drahi told French parliamentarians at the time that acquiring Time Warner Cable was a step too far for Altice USA at that stage, but that there would be further opportunities to expand in the US cable market, where Altice had acquired number seven player Suddenlink.
Altice subsequently acquired Cablevision, which it rebranded as Optimum, and filed a US$1.92 billion IPO in June.
Charter and Verizon looked at a possible combination earlier this year, but nothing came of it. Others in the frame as possible buyers of Charter include Japan’s Softbank, which owns the US number four mobile player, Sprint. However, Softbank is also reliant on debt to fund any bid.
Altice USA filed an IPO in June, widely seen as opening the way to further acquisitions. Drahi is on record as saying that he views expansion of his fixed-line business as a number one priority, with expansion into mobile following. Altice has also invested in content in Europe, seen by Drahi as the number three strategic priority.
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22nd February 2020