Patrick Drahi’s telecommunications empire got a boost just over a month ago with the success of the IPO on Amsterdam Euronext Exchange of his Luxembourg company Altice which holds his most important operating companies. He continued to hold about a 77% position in Altice after the IPO through his own private holding company Next LP (no relationship to Steve Jobs’ Next), of which he also controls the majority of the stock.
Now it very much looks like one of his subsidiaries the French cable and broad-band company Numericable may be bidding to either buy, or merge with, Vivendi’s mobile phone subsidiary SFR – which stands for Société française de radiotéléphone and which has 21 million customers.
Ever since Numericable succeeded with its own IPO last November, but still leaving Altice as the reference shareholder with a 30% stake in the company, since increased to 40%, analysts and others have thought it might take a run at SFR, which Vivendi now wants to unload.
Reports are that Vivendi has given bidders until Wednesday to submit their preliminary bids for SFR, and last week Altice went as far as to officially confirm on its web site as follows, “Altice confirms that it has approached Vivendi regarding a potential alliance between Numericable and SFR. To date Altice has not made any formal offer.”
Any such acquisition would be very politically sensitive in France, which continues to suffer from high unemployment under the socialist Presidency of Francoise Hollande. To counter-act this, just today French newspaper Le Figaro is quoting Patrick Drahi directly as saying he would not reduce the total payroll of Numericable and SFR, and would instead expect to grow the number of subscribers by about 6 million after three or four years, if indeed he does buy it that is.
Le Figaro also claims Altice has secured a US20.7 billion (Euros 15 billion) to take over control of SFR, together with a plan for a further about US$4 billion (Euros 3 billion) equity¡ capital increase. It might even be that, if Vivendi and Drahi see eye to eye the two firms could be merged instead, with Vivendi keeping some shares of Numericable plus some cash. Such a solution would certainly be better for the Numericable balance sheet, particularly during current volatile capital markets.
SFR is much larger, with over 8, 500 employees than Numericable, which has just 2, 400, and because they are in different enough businesses (Landline versus wireless) a Drahi bid may have a strong competitive advantage in the regulatory department compared to other bids, who would tend to be other much larger players, which may come in and therefore be much easier to clear on anti-trust grounds.
Altice already has an interesting basket of international business holdings including the 40% in Numericable of France, 100% of HOT in Israel, 100% of Cabovisao in Portugal, 84% of Numericable in the Benelux countries, 97% of Tricom in the Dominican Republic and 100% of three small cable companies in the French overseas territories.
Through all of these subsidiaries Altice provides cable based services, high quality pay television, fast broadband Internet and fixed line telephony and, in certain countries, mobile telephony services to residential and corporate customers.
With over US$1.3 billion (Euros 1 billion) of pro-forma adjusted EBITDA for the nine months to September 30th, 2013 the business appears to have a good deal of depth. With the successful conclusion of its IPO Altice had net debt on a pro forma basis of about US$8.5 billion (Euros 6.2 billion). That is about 4.7 times annualized pro-forma EBITDA, and without adding extra weighting for the Christmas quarter.
After the dust settled with the IPO, which raised just over US$1 billion (Euros 750 million) of new money for for the company, and with a ten percent price jump since, at US$42.8 (Euros 31) per share the company has a market capitalization of US$8.7 billion (Euros 6.3 billion) on 202.79 million shares outstanding.
All through the IPO proceedings Patrick Drahi signalled quite clearly he is still in acquisition mode, and SFR may well be the next logical stepping stone for him therefore, as his pyramids continue to grow and extend.
About Patrick Drahi
Patrick Drahi was born in Paris where, when he grew up, he studied engineering at the prestigious school for the French élites, L’École Polytechnique.
Subsequently, he worked at Philips where he advanced to the position of department head. He began investing privately in the early nineteen nineties – buying small cable companies in the Provence region of southern France.
He founded the company UPC France, then in 1999 sold his shares. In 2006 he bought the company back again through Altice, the cable company he by then owned, for one third of the price. Altice later purchased cable companies in Luxembourg, Belgium, Portugal and the Dominican Republic. Drahi also now owns 40% of Numericable, the largest cable company in France.
In 2009 he purchased interests in Israeli company HOT cable, and also in the MIRS mobile phone company there, which he bought from Motorola.
Patrick Drahi permanently resides in Geneva, and also has an apartment at the Rothschild 1 project in Tel Aviv. With a personal net worth estimated at around US$1 billion, Drahi traditionally refrains from interviews and exposure to the media, though if his newly public companies continue to prosper, grow and acquire he may have little choice but to become more visible in the future.