Patrick Drahi, Franco-Israeli businessman, executive chairman of cable and mobile telecoms company Altice and founder of Numericable, attends a hearing at the French National Assembly in Paris in May this year. The Cablevision buy would vault Drahi’s Altice into the ranks of major pay-TV players in the US and accelerate Drahi’s push to create a cross-Atlantic cable giant.
Bloomberg/New York
Altice, billionaire Patrick Drahi’s European telecommunications company, agreed to acquire Cablevision Systems Corp in a $17.7bn deal to create the fourth-largest cable provider in the US.
Cablevision investors including the controlling Dolan family will receive $34.90 a share in cash, or 22% more than the stock’s last close in New York. Altice will finance the purchase with $8.6bn of new debt at Cablevision and $3.3bn of cash from Altice it’ll raise by selling new shares. BC Partners and CPP Investment Board have an option to buy as much as 30% of Cablevision, Altice said yesterday.
Altice jumped as much as 13% in Amsterdam. Cablevision would vault Altice into the ranks of major pay-TV players in the US and accelerate Drahi’s push to create a cross-Atlantic cable giant. The company agreed in May to buy majority control of St Louis-based Suddenlink Communications in a $9.1bn deal that marked the first US foray by the French-Israeli tycoon.
For 88-year-old Charles Dolan, one of the pioneers of the cable industry, the deal marks an exit from the cable business after more than four decades and a refocus on the sports assets he still controls.
The Dolan family had in recent years spun off Madison Square Garden Co, owner of the New York Knicks basketball team and the New York Rangers hockey team, as well as AMC Networks, home of shows such as The Walking Dead.
Big changes in viewing habits are driving consolidation among pay-TV providers and spurring entertainment companies, their programming suppliers, to consider moves of their own. Cable and satellite TV in the US suffered the largest subscriber losses ever in the second quarter, in part because of the popularity of web TV services like Netflix. That’s threatening the industry’s two sources of revenue: ads and subscriber fees.
Cablevision, based in Bethpage, New York, advanced 17% to $33.30 in early US trading. Altice added 2.7% to €25 at 1:46pm in Amsterdam, after rising as high as €27.41.
Charles Dolan founded Cablevision in 1973. He also started HBO before selling it to what was then called Time-Life. The billionaire is chairman of Cablevision, which is run by his 60-year-old son James, the chief executive officer. The family holds about 72% of the voting power at Cablevision through Class B shares that have 10 votes each.
Cablevision owns money-losing New York-area newspaper Newsday and TV station News 12, and Altice has committed to funding them, according to a person familiar with the matter.
The US pay-TV industry is consolidating rapidly. AT&T acquired DirecTV, the biggest satellite operator, in July for about $65bn, including debt, and John Malone’s Charter Communications is scooping up Time Warner Cable, the No 2 cable company after Comcast Corp, in a transaction valued at $79.2bn.
Cablevision had 2.6mn video subscribers as of the second quarter, according to data compiled by Bloomberg, while Suddenlink had about 1.1mn. By comparison, DirecTV had 20.3mn and Time Warner Cable almost 11mn.
Altice’s offer values Cablevision at 9.64 times estimated 2015 earnings before interest, taxes, depreciation and amortization, compared with the 9.35 times US peers are valued at on average, according to Bloomberg Intelligence.
Drahi, 52, has built Altice into one of Europe’s most acquisitive telecommunications companies since its 2014 initial public offering. With a cable and phone empire stretching from Israel to France and the Caribbean, Drahi also used Altice to expand in media. His net worth tops $16bn, eclipsing cable rivals including Malone, who is worth $8.6bn, according to the Bloomberg billionaires Index.
In June, Drahi unveiled a plan to convert Altice into a holding company to gain a new stock for future takeovers without risking a major dilution in his control. The following month, Drahi said he was interested in acquiring US cable companies such as Cablevision, sending the stock up.
Debt financing has been a key component of Drahi’s acquisition strategy. Altice’s net debt reached €26bn last quarter and any interest-rate increase would make it more costly to borrow money. Economists remain split on whether the Federal Reserve will announce the first interest-rate hike in nine years today.
JPMorgan Chase & Co, BNP Paribas and Barclays advised Altice. Bank of America Corp, Guggenheim Securities and PJT Partners assisted Cablevision.