As expected French media giant Vivendi announced today that it has received two legally binding offers for a controlling stake in its mobile phone subsidiary SFR.
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One of the offers has been made by Patrick Drahi’s Altice, on behalf of its French cable subsidiary Numericable, and the second offer comes from by the French Bouygues telecoms group. They both include firm financing commitments. The two invited bids come as Vivendi is trying to cut its exposure to the telecoms business, in order to concentrate instead on its media and entertainment assets.
By securing a sale of all, or part, of the business Vivendi can avoid the need to go through a spin-off process, which had earlier been on the table as well. If it gets a better price this way then the Vivendi board may well find the sale option to be the most attractive alternative for its shareholders, and as well secure the future of SFR and their employees.
Vivendi has confirmed that its Supervisory Board will now examine both of the offers. It is quite possible Vivendi may keep a minority stake in SFR whoever they sell it to.
While the precise values of the two offers have not been disclosed, French media have been indicating that both the Bouygues offer and the Altice/Numerciable offer are somewhere “around” US$20 billion (Euros 15 billion).
SFR, which stands for Société française de radiotelephone, today is the second largest mobile phone operator in France, actually ahead of the Bouygues group, which is third.
A Bouygues transaction would likely raise some immediate anti-trust issues, both domestically in France and as well with the European Commission in Brussels. As France’s third-biggest mobile phone operator Bouygues, which is led by French businessman Martin Bouygues, is reported to be ready to deal with these issues up front by offering to sell some of its mobile spectrum and divest some of its 15, 000 antennas scattered around the nation, in order to address competition regulators’ concerns that a deal with him would excessively reduce competition in the French mobile phone market.
A transaction with Altice/Numericable would likely not raise any such issues at all however, as Numericable is not presently in the mobile phone business in France.
Whoever wins the bid, the banking sector is getting ready to supply some very large loans to the winner with both groups having lined up financing for their offers. For either deal, likely to be part cash and part shares, banking financing of up to, say, Euros 12 billion, enough for about 75-80% of the total bid value, perhaps, will need a massive syndicate of major international banks – providing both senior loans and junior bonds.
Accordingly, French media have been reporting that both groups have succeeded in putting their war chests together, resulting in today’s announcement by Vivendi that the bids it had received were legally binding.
In the important process of shaping the perception of how their bid is received by public opinion, which then directly impacts how politicians and regulators respond both groups have made statements to the press in recent days.
Drahi is apparently committing to maintain the overall employee levels of both SFR and Numericable after a purchase, and to grow the business by 6 million subscribers over two to three years. For its part Bouygues has reportedly promised to deliver about US$13.8 billion (Euros 10 billion) worth of cost savings from the deal.
Of the two approaches, so far one would have to say the Patrick Drahi approach is more likely to be one that resonates best with public opinion. Politically, one would tend to think everybody loves a growth strategy more than one just of consolidation and cost cutting… of course if Drahi wins part of his future growth may be at Bouygues expense. But that, folks, is what competition is all about isn’t it?
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.