Altice faces the music, again
Welcome to Due Diligence, the FT’s daily deals briefing
Two years ago, the top brass at telecoms roll-up company Altice stood before a packed room of upset investors in Barcelona and made a promise: after having splashed tens of billions on deals globally it would finally dial back on dealmaking and focus on running its operations to stem a free fall in its share price.
Fast-forward to Wednesday: same location, same angry investors and same problem. Despite a brief period in between when Patrick Drahi,the billionaire owner of Altice, managed to keep his word about lifting the global telecoms and cable company’s share price, it has seen its value plummet since the start of November.
A poor set of results and the recent departure of Michel Combes, a well-regarded former Alcatel-Lucent executive who Drahi hired to steward Altice in its post-deals afterglow, led the Franco-Israeli founder to take back the reins of the company last week.
But what has gone wrong? Ostensibly, Altice has failed to deliver improvements on its French business and investors have begun getting rather nervy about the company’s enormous debt pile.
The negative aura around Altice is in stark contrast to how things looked this summer when it went to list its US businesses and investors flocked to the offering, praising the improvements the Drahi-Combes duo had made at Suddenlink and Cablevision (which it bought in 2015 and 2016, respectively). Investors loved it so much that no one even seemed to care about the unbelievably cushy perks set aside for management and the fact that the offering consisted exclusively of non-voting shares.
Before November, Altice was flying so high again that it seriously spent time this summer pondering a $185bn+ bid for its much larger US rival Charter Communications, the second-largest US cable company. It would have capped a stunning run for Drahi, whose fortune is geared heavily to that of Altice’s given his over 60 per cent ownership of the company’s shares. (Read our 2015 piece on Altice’s playbook and how Drahi’s strategy relies heavily on the methods of billionaire cable cowboy John Malone
Now what? Is Altice nothing more than a debt-addicted roll-up backed by deal junkies who are busy chasing the next big transaction or are they serious operators? Here’s the scene in Barcelona from Wednesday, courtesy of Nic Fildes, our telecoms correspondent, where Altice chief financial officer Dennis Okhuijsen promised to get its €50bn in debt under control.
How did investors respond?
One shareholder said many institutional investors had been “ruined” this year as a result of the stock collapse. However, another shareholder cautioned that the reaction to the trading statement was “completely overblown”.
Shares in Altice finished up 8 per cent. But the story is just getting interesting.