Bouygues faces crossroads choice on telecoms business

[June 23, 2015] By Leila Abboud

PARIS (Reuters) - Martin Bouygues, scion of one of France's top industrialist families, must decide on Tuesday whether he is ready to part with the telecoms business that is his main contribution to the conglomerate built by his father.

The Bouygues board will meet at 1600 GMT (1200 EDT) to discuss what sources said was a 10 billion euro ($11.3 billion) bid by European telecom group Altice. In reality, the decision lies with the 63-year-old Bouygues alone.

"No one really knows what is on his mind, whether he'll sell now," said one person familiar with the situation.

"(But) if he sells, he'll have commanded an amazing price for the business he founded and carries his name," the source said of a business ranked as France's third largest mobile player.

Martin Bouygues has already rebuffed at least two offers for the unit in the past year and as recently as last month Bouygues insisted that Bouygues Telecom could prosper on its own. He once even rebuffed a question about selling the business by firing back at a journalist: "And you, would you sell your wife?"

But the offer by Altice's Patrick Drahi, a fellow telecoms tycoon whose own empire-building took off in 2014 when he beat out Martin Bouygues to acquire Vivendi's SFR, the second-biggest mobile operator, outstrips all past approaches.

A 10 billion euro price tag would value the unit as much as the entire Bouygues group before the offer was made public -- and much higher than two previous offers that Bouygues got for about 5.5 billion from Orange and Iliad, and 8 billion euros in an earlier approach from Drahi.

It would be the equivalent of 14.4 times its 2014 EBITDA earnings of 694 million euros, compared to what investment house Raymond James estimated was a mobile sector average of 7-11 times before synergies.

POLITICAL CONCERN

Price is not the only factor in Bouygues' decision.

Drahi could extract as much as one billion euros a year in synergies, analysts estimate, a fact that would create lucrative new profit margins but only at the expense of painful job cuts -- something Bouygues would want to avoid for the family business.

Top ministers in President Francois Hollande's Socialist government have moreover expressed their concern over the deal.

Prime Minister Manuel Valls on Tuesday set five conditions for any accord, including employment guarantees, assurances on investment in high-speed broadband and the upcoming auction of radio spectrum for 4G mobile broadband networks, from which the state wants to raise 2.5 billion euros.

Set against that is the increasingly cut-throat nature of the French telecoms sector and how Bouygues Telecom, after a strong start, has struggled to keep up since the 2012 arrival of Iliad took the total number of players to four.

A turnaround plan including staff cuts and a re-positioning of the business has failed to generate positive cash-flow, while its late entry into the fixed line market means it can only sell broad-band by renting capacity from Numericable.

By 0750 GMT (0350 EDT) Bouygues shares were up 0.25 percent, having jumped 13 percent on Monday despite uncertainties surrounding the deal, while Altice shares were up 0.6 percent and Numericable-SFR <NUME.PA> shares were down 2.3 percent.

(Reporting by Leila Abboud and Laurence Frost; Editing by Mark John and Keith Weir)

[© 2015 Thomson Reuters. All rights reserved.]

Copyright 2015 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.