Vivendi agrees to sell SFR to Numericable; takes 20% stake in combined company

7 Apr 2014

French media group Vivendi announced on Saturday (5 April 2014) that its Supervisory Board has accepted a takeover offer for its domestic telecoms unit SFR from cable group Altice/Numericable, which involves a EUR13.5 billion (USD18.5 billion) cash payment and gives Vivendi a 20% stake in the resultant SFR-Numericable group. Vivendi noted that its board also reviewed offers from rival bidder Bouygues, but unanimously selected the Altice/Numericable deal as it offered ‘the highest growth potential, generating the highest value for its customers, employees and shareholders, while best meeting Vivendi’s objectives.’ The plan is subject to union and regulatory approval.

The Altice group has agreed to take a 60% controlling stake in the combined entity SFR-Numericable, to be publicly listed in France with a free float of 20% alongside Vivendi’s 20% share, which the group has an option to sell after a one-year lock-up period (with Altice claiming first refusal rights). In addition to the EUR13.5 billion cash price, under the deal’s terms Vivendi can earn a potential additional consideration of EUR750 million if SFR-Numericable’s EBITDA-CAPEX value is at least equal to EUR2 billion during one fiscal year, and the seller said that combined with the potential earnings from selling its minority stake in the future, the deal should represent a total value for Vivendi in excess of EUR17 billion. Initial total debt financing of the combined entity will be EUR11.64 billion, while Vivendi will retain minority board representation in SFR-Numericable allowing it ‘veto power on key reserved matters’, subject to it retaining its 20% stake.

Vivendi’s board highlighted the following criteria in choosing Numericable:

1. ‘Quality of the project’; the Altice/Numericable project is based on fixed and mobile convergence, with synergies resulting from the interdependence of the two merged entities’ networks. SFR-Numericable’s positions in very high speed fixed and mobile will generate new growth opportunities, an acceleration of the number of connected lines and very high quality offers for enterprise and retail customers. They will also offer important development opportunities for quadruple-play and new usage. They are consistent with the French government’s ‘France Tres Haut Debit’ plan launched in February 2013.

2. ‘Commitment to preserving employment’; Vivendi set as a prerequisite for the potential buyers a commitment to employment. This also corresponds to the priorities defined by the French government. The plan presented by Altice/Numericable fully guarantees development of sustainable employment in particular thanks to the investments planned.

3. ‘Competition risks’; all the experts consulted concluded that the Altice/Numericable offer presents the lowest competition risks. Mobile and fixed broadband network operator SFR and Numericable (a cable specialist but also possessing xDSL/fibre assets, partly via a previous merger with Completel) ‘are not present on the same market segments and their activities are complementary’, Vivendi’s board concluded.

4. ‘Valuation for valuation’; Vivendi selected the most balanced offer between cash upfront and stock participation allowing the group to benefit from the highest total valuation. While pursuing its announced strategy to focus on media, Vivendi wants to support SFR, its 27 year-long subsidiary, by strengthening its industrial and social structure.

Following the deal’s announcement, Numericable revealed on Sunday that it will launch a rights issue worth up to EUR4.7 billion to help fund the acquisition of SFR, to be guaranteed by the holding company of Altice/Numericable financial backer Patrick Drahi. The remaining EUR8.8 billion of the cash price tag will be funded by debt, Reuters reports.

Meanwhile, as confirmed in a statement issued this morning (7 April 2014), private equity firms Cinven and Carlyle Group agreed to exchange their combined holdings of 34.6% in French cableco Numericable for cash and shares in Luxembourg-based parent Altice, ahead of the merger deal with SFR going ahead.

France, Altice Europe (formerly Altice Group), Altice France (SFR), Bouygues Telecom, SFR, Vivendi