Merger Market
* Growing dissension among Dolan family members led to deal
* Will continue to look at acquisitions if they present themselves
Altice (AMS: ATC) will look to lay fiber to the curb, or the last amplifier, in a network rebuild that it estimates will take five years, said Altice Chairman Patrick Drahi.
This new build-out will allow the company to grow EBITDA, a prospect it hopes will underpin investment in the company’s planned equity raise, he told this news service on the sidelines of Goldman Sachs Communacopia conference this afternoon.
The European cable and wireless company said Thursday it had entered into a definitive agreement to acquire US-based Cablevision Systems Corporation (NYSE: CVC) for USD 34.90 in cash per share, in a deal valued at USD 17.7bn.
As part of the deal, the Amsterdam-listed telco investment vehicle will raise approximately USD 2bn in equity financing, with potential private equity investors BC Partners and CPP Investment Board participating in the funding. The PE firms have the option to participate for up to 30% of Cablevision’s equity.
The Mergermarket Group, publisher of this news service, is a BC Partners portfolio company.
Drahi told investors at the Goldman Sachs event that Altice is aiming to increase Cablevision’s EBITDA margins from 32% currently to 40% over time. He also told the US audience of his margin successes in France, Portugal and Israel.
An industry banker said "growing dissension" among the controlling Dolan family pushed Cablevision toward a sale. The banker added that the company has tried in the recent past to elicit interest from Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC), as either player would be able to consolidate the metropolitan New York cable market, the nation's largest.
A Cablevision spokesperson did not immediately respond to a request for comment.
A person with knowledge of Time Warner Cable's thinking on the matter told this news service in May that it might have given strong consideration to an acquisition of Cablevision five years ago, but since then Cablevision's footprint has become heavily penetrated by telecom giant Verizon Communications' (NYSE: VZ) FiOS video service.
The industry banker said Cablevision CEO James Dolan is now more interested in The Madison Square Garden Company (NYSE: MSG) and its related assets than trying to expand Cablevision's cable franchise. MSG's board granted final approval for a spinoff of its entertainment and sports businesses into a separately traded entity last week.
Meanwhile, Altice CEO Dexter Goei told this news service, also on the sidelines of the Goldman Sachs conference, that the company would not need to wait to digest Cablevision to make another deal if the opportunity presents itself.
Asked if Altice would be able to pursue other transactions before the expected close of the Cablevision deal in the first half of 2016, Goei said the company would stay proactive. In the current market, lining up concurrent deals is key, Goei, added.
The Cablevision transaction comes on the heels of Altice's May 2015 deal to acquire Suddenlink Communications, the seventh-largest cable group in the US, for USD 9.1bn.
Taken together with the Suddenlink assets, Altice's deal for Cablevision will make it the fourth-largest cable operator in the US, the company said Thursday.
Goei reiterated comments made earlier in the day by CFO Dennis Okhuijsen that Altice expects to complete a USD 2bn capital raise before the Cablevision deal has been consummated.