Vivendi to sell telecom biz SFR to Altice in $23 bn deal

Vivendi has decided to sell its telecom unit SFR, France’s second largest mobile operator, to Altice-owned cable company Numericable in a deal that could eventually be worth more than $23 billion.

The deal is part of Vivendi’s strategy to focus on its other businesses, Universal Music Group and Canal+ pay television.

As per the deal, Vivendi will receive at least 13.5 billion euros ($18.5 billion) in cash plus a 20-percent stake in the new entity. The new entity will have a free float of 20 percent, while Altice will own 60 percent and Vivendi 20 percent equity stake.

Reuters reported that the plan effectively hands victory to Numericable’s Franco-Israeli backer Patrick Drahi after a fierce bidding war against fellow billionaire Martin Bouygues, whose family company owns France’s No. 3 mobile operator.

The agreed sale of SFR also promises to reshape Europe’s third-biggest telecoms market after two years of fierce price competition, triggered by the arrival of low-cost player Iliad in the mobile arena.

Vivendi said it picked Numericable as the better bid in terms of business logic, commitment to preserving jobs, chances of regulatory approval and long-term value. Numericable’s bid was the most balanced in terms of immediate cash payment and equity, even if Bouygues’ latest proposal actually promised more cash upfront.

Numericable had offered 13.5 billion euros in cash, a milestone payment of 750 million euros – linked to underlying return on capital expenditure – and a 20-percent stake in the new entity. Bouygues had offered 15 billion euros in cash and a 10-percent stake.

SFR deal finalized

Numericable’s bid should represent a total value above 17 billion euros, Vivendi said in its statement. On the other hand, the bid of Bouygues would have valued SFR at 16 billion euros before cost savings, or 16.5 billion including an earn-out clause of 500 million euros if certain targets were met.

Martin Bouygues 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 upstart Iliad.

AP reported that the sale comes as the European telecommunications industry tries to consolidate: There are about 150 major operators in Europe compared with four in the U.S.

Vivendi said on Saturday that SFR and Numericable don’t compete with each other. That could improve the chances regulators will approve the transaction.

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