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 The move is the latest foray by French-Israeli billionaire and
Altice founder Patrick Drahi, who built a telecoms and cable empire
in recent years via debt-fueled acquisitions in France, Portugal and
Israel.
Drahi entered the United States in May by buying small regional
cable group Suddenlink for $9.1 billion and had declared he would do
more acquisitions so as eventually to earn half of Altice's revenue
there.
In talks that began in June, Drahi managed to convince Charles
Dolan, the patriarch of the Irish-American family that owns
Cablevision, to part with the asset they had long said they would
not sell.
Altice will pay $34.90 in cash per share, a 22 percent premium on
Wednesday's closing price of $28.54, and a person close to the
company said it will finance the deal with $3 billion from a share
sale and $7 billion in debt.
Cablevision has 3.1 million customers in the New York, Connecticut
and New Jersey area.
Drahi is expected to apply his cost-cutting zeal to generate $900
million in synergies a year at Cablevision, but will have to contend
with fast-changing competition as consolidation picks up among U.S.
cable groups seeking to cope with changing customer viewing habits.
Video streaming services like Netflix pose a threat to ad and
subscription revenue, leading U.S. cable and satellite groups to
suffer the largest subscriber losses ever in the second quarter.
"The acquisition of Cablevision represents Altice's next step in the
U.S. market," Altice said in a statement. "Together both operators
represent the fourth-largest cable operation in the U.S. market."
ALTICE SHARES RIDING HIGH
The transaction, which is expected to close in the first half of
next year, is to be financed with $14.5 billion of new and existing
debt at Cablevision, cash on hand at Cablevision and $3.3 billion of
cash from Altice.
Two investment funds, BC Partners and CPP Investment Board, have
also agreed to buy up to one-third of Cablevision to help pay for
the deal.
Altice, whose corporate headquarters are in the Netherlands, said
that as part of the financing, it would issue Class A shares, which
have fewer voting rights than the B shares held largely by Drahi.
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Altice created the dual-class structure in June so as to allow it to
do more deals in shares without Drahi losing control.
Shares in Altice were up 3.4 percent at 25.16 euros by 0800 GMT
after gaining nearly 13 percent at the open.
Investors who back Drahi's acquisition spree have made Altice
Europe's best-performing telecom stock this year, up more than 50
percent before Thursday's deal, compared with an 8.4 percent rise in
the sector index.
Altice, which has also been snapping up television and radio targets
in Europe in recent months, will also become the owner of Newsday
newspaper and local news channel News 12 Networks.
Gary Paulin of brokerage Aviate Global said Altice could benefit
massively from applying its cost-cutting strategies at Cablevision.
"Cablevision is ripe for picking as it has the lowest margins of the
four major U.S. players... so [large] efficiencies could be had if
Altice execute in their normal manner," he wrote in a note, adding
that Cablevision margins were 28 percent compared with U.S. cable
average of 35 percent.
JP Morgan, BNP Paribas and Barclays have committed to finance the
deal and also advised Altice on it. Cablevision was advised by Bank
of America Merrill Lynch, Guggenheim Securities and PJT Partners.
(Additional reporting by Rob Smith in London; Editing by Andrew
Callus and Keith Weir)
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