European telecoms group Altice has agreed to buy US regional cable company Suddenlink Communications for $9.1 billion, making a first move across the Atlantic and setting the stage for further deals there. In addition to Suddenlink, the seventh-largest US cable player, Altice has also approached No 2 provider Time Warner Cable over a deal, sources said, creating a potential bidding war with John Malone's Charter Communications.
Altice Chief Executive Dexter Goei declined to comment on Time Warner, saying only that Altice saw the United States as fertile territory given strong sales growth and potential for deals there. "Everything below Comcast is in consolidation mode," he told an analyst call, referring to the largest US cable provider. "It augurs for interesting next six to 18 months and we clearly expect to be right in the middle of that."
Patrick Drahi, Altice's billionaire founder, wants to build an empire in cable and mobile after doing four major deals last year alone. Investors appear to back him to succeed, sending Altice shares up 11 percent to all-time highs of 128.05 euros in afternoon trade. But few expected the 51-year-old tycoon to target the United States, analysts said, since it seemed more likely that Altice would seek acquisitions in its existing markets, namely France or Israel, to create larger cost savings more quickly. Drahi's foray into the US cable market, which is being reshaped by mergers and the rise of faster broadband, could put him on a collision course with the man he has long cited as a role model: cable tycoon John Malone.
Drahi sold the first business he built, a French cable company, to Malone's European cable group UPC, working there for a while before creating Altice in 2001. Malone's Charter is also interested in Time Warner, which was put back in play after Comcast's attempt to buy it foundered under regulatory opposition. "Altice is very keen on Time Warner Cable," a source familiar with the matter said following the Suddenlink deal.
With a market value of $44.5 billion, Time Warner would be a big bite for Altice, which has a market value of about $30 billion. Despite the size of a potential deal, Altice's offer for the company is expected to be mainly in cash rather than shares, the source added. Altice could also team up with private equity funds to help finance deals, Goei said, but would keep majority ownership so it has operational control at companies it buys.
Malone indicated he might be back on the deal trail after he told Bloomberg that his Liberty Global company would make a "great fit" with Vodafone, the world's second-biggest mobile operator. In the United States, Malone's Charter is also working on a planned buyout of Bright House Networks. Altice will buy 70 percent of Suddenlink from existing shareholders BC Partners, CPP Investment Board and Suddenlink management. BC Partners, CPP Investment Board and other smaller investors will retain the rest, allowing them to benefit from future consolidation in the US market.
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