Drahi’s Bouygues Telecom Bid Opposed by Ex-M&A Banker Macron
(Bloomberg) -- Patrick Drahi’s bid for Bouygues Telecom is putting French Economy Minister Emmanuel Macron, a former mergers banker, in the unusual position of opposing a takeover.
The proposed combination could result in job cuts, higher prices for consumers and a wireless operator with too much debt, Macron told reporters in Paris on Monday.
“At the end of the day, is it good for the economy? The answer is no,” Macron said. “Is it good for investment. The answer is no. Is it good for employment? The answer is no.”
He summoned Drahi, the chairman and founder of Altice SA, to his office overlooking the Seine on Tuesday to discuss the proposed merger. The reaction runs counter to his hands-off approach to French deals since taking office last year, and recalls the style of his predecessor, Arnaud Montebourg.
While the French state doesn’t have a direct say over a potential sale of Bouygues Telecom to Drahi, it can exert influence on deals in the highly regulated telecom industry.
“The government is likely to require job protection measures and guarantees on investments,” wrote Nawar Cristini, an analyst at Nomura Holdings Inc., in a note.
Just hours after news of the offer became public on Sunday, Macron released a statement saying the timing isn’t right for consolidation and advising telecom moguls to invest in infrastructure rather than indulge in dealmaking.
Wireless Auctions
Drahi’s offer values the wireless carrier at about 10 billion euros ($11.3 billion), people with knowledge of the matter said. The bid was made by Numericable-SFR, the cable and mobile-phone unit of Altice, Drahi’s holding company.
The board of Bouygues SA, the parent of France’s third-largest mobile-phone operator, will meet Tuesday to discuss the unsolicited offer. The shares rose 0.2 percent by 9:55 a.m. in Paris trading, after surging 13 percent on Monday.
Prime Minister Manuel Valls also weighed in on Monday, saying there are five main issues to consider: the effect on jobs, investment, the sale of mobile frequencies, innovation and customer service.
“Any operation which doesn’t deal with these major issues won’t get support from the government,” Valls said while visiting a factory near Paris.
The government has said it’s seeking at least 2.5 billion euros in an auction of wireless licenses before year-end. From Macron’s standpoint, fewer carriers competing could lower the proceeds, people with knowledge of the matter said.
Leverage Concern
Altice executives plan to tell the minister that consolidation won’t curb carriers’ appetite for mobile frequencies, which is being fueled by the increasing use of smartphones to watch videos and play games over the Internet, people familiar with the matter said. The executives may also argue that going from four carriers to three will allow the industry to invest more in its networks.
Those assurances may ring hollow to Macron given the level of Altice’s borrowings. The firm had net debt of 24.5 billion euros, on a pro-forma basis, at the end of the first quarter, company reports show.
“I have a big concern in terms of leverage,” said Macron, 37, who worked as a banker at Rothschild for almost four years starting in 2008. “I don’t want to create a too-big-to-fail player” that would require a state bailout if it collapsed, he said.
Montebourg Meddling
After Montebourg’s tenure, notable for his meddling in the affairs of companies such as Alstom SA and Dailymotion SA, Macron had taken a less intrusive approach.
In October, he went to lengths to show he had no say in drugmaker Sanofi’s decision to oust Chief Executive Officer Chris Viehbacher. His team didn’t stand in the way of Nokia Oyj’s takeover of Alcatel-Lucent SA.
France is a big investor in its telecommunications industry, and owns about 26 percent of former phone monopoly Orange SA. Orange CEO Stephane Richard has repeatedly called for consolidation and said his company would do what it can to facilitate a deal, though it won’t take the lead.