Vivendi accepts Numericable bid for SFR

Reuters

Paris

France’s Vivendi said it had agreed to accept cable company Numericable’s bid for its telecom unit SFR, which would give Vivendi at least 13.5 billion euros ($18.5 billion) in cash plus a 20% stake in the new entity.

The announcement came after a sweetened, last-ditch offer from rival Bouygues - the outsider in the race but favoured by the French government - led Vivendi to take more time to weigh the bids in what has become a month-long battle to reshape Europe’s third-biggest telecoms market.

Vivendi said in a statement yesterday that its supervisory board had unanimously voted to retain Numericable’s offer, which promised a first payment of 13.5 billion euros, a separate 750 million euro payment under certain conditions, and a 20% stake in the new entity.

Bouygues’ offer, meanwhile, was 15 billion euros in cash and a 10% stake in the new entity.

Bouygues’ bid would have valued SFR at 16 billion euros before cost savings, and at 16.5 billion with an “earn-out” clause of 500 million euros if certain targets were met.

“Vivendi has accepted the offer with the best balance between immediate cash payment and equity,” Vivendi said. “The (Numericable) offer would represent a total value above 17 billion euros.”

Numericable was the front runner after Vivendi’s board chose it on March 14 for three weeks of exclusive talks.

Both suitors for SFR are backed by billionaire businessmen who have put their all into the fight, lobbying France’s government for support, pledging not to cut jobs after the deal, and hitting up debt markets for funds to fuel their bids.

Martin Bouygues, the scion who runs the family-owned construction-to-media group, wanted to buy SFR to save Bouygues Telecom, France’s third-biggest mobile operator, which has been hit hard by France’s fierce telecoms price war since the arrival of low-cost player Iliad in the mobile arena.

Vivendi’s decision has in the end effectively granted victory to the Franco-Israeli tycoon Patrick Drahi, Numericable’s backer, who dreams of marrying his cable group with SFR to create a “national champion” in high-speed broadband and mobile.

The sale of SFR will also cap a strategic overhaul at Vivendi that began in spring 2012, when veteran chairman Jean-Rene Fourtou declared there would be “no taboo” in  re-examining the 160-year-old group’s unwieldy holdings, which  ranged from video games to telecoms in Brazil.

Once a cash cow, SFR has seen its operating profit halve from 2011 levels to 1.07 billion euros last year. Nevertheless, SFR accounted for more than half of Vivendi’s sales and profits last year.

France’s Vivendi said that its board needed more time to weigh two bids for its SFR telecom business, leaving business and political circles in suspense over a month-long, 15bn euro takeover battle. The move came after Bouygues, the outsider in the race but favoured by the French government, submitted a last-ditch offer for SFR that put an extra 1.85bn in cash on the table, taking the total to 15bn euros ($20.6bn) plus shares.

Before Bouygues’ latest gambit, cable group Numericable had been best-placed to win after Vivendi’s board chose it on March 14 for three weeks of exclusive talks.

Numericable’s last public offer would have given Vivendi 11.75bn euros and a 32% stake in the new company. But sources close to the deal said it had improved its bid since then to close the gap with Bouygues. The 13 members of Vivendi’s board met for about five hours on Friday before adjourning.

Earlier it remained to be seen if the board of Vivendi, which is selling SFR as part of a strategy to refocus on its media businesses, will be convinced by Bouygues’ latest move - its fourth bid - or stick with its original preference for Numericable. There could be more twists in the tale if the government weighs in. Industry Minister Arnaud Montebourg sided openly with Bouygues last month, arguing that going down to three mobile operators from four would calm “destructive competition”.

Both suitors for SFR are backed bybnaire businessmen who have put their all into the fight, lobbying France’s government for support, pledging not to cut jobs after the deal, and hitting up debt markets for funds to fuel their bids.

Martin Bouygues, the scion who runs the family-owned construction-to-media group, wants to buy SFR to save Bouygues Telecom, France’s third-biggest mobile operator, which has been hit hard by a fierce price war.

Franco-Israeli tycoon Patrick Drahi, Numericable’s backer, dreams of marrying his cable group with SFR to create a “national champion” in high-speed broadband and mobile.

Despite Vivendi rebuffing Numericable’s first run at SFR in 2012, Drahi was so confident he had won the prize this time that he told reporters at a press conference on March 17 that the three-week exclusivity was a formality during which lawyers would finalise the paperwork. Claudio Aspesi, analyst at Bernstein Research, said the latest bids were not far apart, however.

“Neither bidder has come in with something that trumps all. Investors had hoped the bidding war would lead to higher valuations being offered,” he said.