Published On: Wed, Jun 24th, 2015

Bouygues Rejects Altice $11 Billion Offer For Telecom Unit

Like a well rehearsed boxing match punches and counter punches have come in rapid fire succession over this potential M&A transaction.

patrick Drahi


On Monday we learned that Patrick Drahi’s Altice telecoms group had made a bid, through its French cable subsidiary Numericable-SFR, for the number three French mobile operator Bouygues Telecom. Bouygues Telecom is a subsidiary of the French construction company Bouygues Group which is led by founding family member Martin Bouygues. While the value of the bid was not disclosed, it is thought to be in the US$11 billion range.

In response, Bouygues issued a press release Monday saying simply it would consider the bid at a board meeting the very next day, on Tuesday. That is a very short turn-around so one can easily surmise they must not have been surprised by the offer.

Finally, last night Bouygues announced in another release that it was turning the offer down flat and would not pursue it further. So far today Altice itself has made no official comment of its own to the rejection.

Bouygues offered four reasons for their decision to reject the offer. First, it believes data driven growth can drive the value of its business upwards moving forward, in mobile and fixed broadband as well. Second, it believes its profit margins will respond upwards accordingly as well. Third, Bouygues is worried about the response of competition authorities who could nix the deal and leave it exposed to execution risk. Finally, it claims to be concerned about the effects on employment of consolidation moves that could obviously occur in the aftermath of such an acquisition.

After being hammered for the last two years by Free, the low cost mobile service offered by the number four competitor in the French mobile market, and squeezed from above by the two market leaders, one suspects the real reason for their rejection lies in the attitudes of the French government which has lately signaled opposition to further consolidation of the industry.

According to Reuters, moreover, President Francois Hollande’s Socialist government had expressed concern over the deal, saying it could be bad for jobs, consumers and investment,  which is fairly emphatic. The Bouygues press release certainly indicates its “Board paid great attention to the consequences of market consolidation on employment as well as the social risks inherent to such an operation.” – Translation: “this isn’t going to fly the way it is…”

In a sense, Bouygues may have been caught between a rock and a hard place, and will now soldier on; their shares have fallen back, too, after their decision was announced. So have the shares of Altice, indicating investor disappointment with the outcome on both sides. The deal may now simply wither on the vine, or somehow be rescued with further employment guarantees of some kind to be made to the French government by Altice, so it remains something to watch and we will see if or how they now respond. Of course, if you promise to fire nobody, then the business benefits of a combination can tend to rapidly disappear.

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