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Altice clarifies Bouygues offer

June 26, 2015

By Colin Mann

Multinational cable and telecommunications player Altice has issued clarification of its bid to acquire fellow French mobile telco Bouygues Telecom, noting with regret that the Bouyges Board had decided not to follow up on the Altice group’s offer to enter into negotiations, but had not once, either through its advisers or through its management teams, sought any details or explanations from Altice regarding the Offer before being presented to the Board.

In its clarification, Altice says it made an offer to Bouygues on June 3, 2015, which was updated on June 21, 2015 to provide further specific details (the Offer), the key terms of which were:


The Offer values Bouygues Telecom at a minimum of €10 billion, approximately 15 times estimated 2015 EBITDA, as communicated by Bouygues in its market guidance, and 25 times 2017 EBITDA – CapEx, as projected by Bouygues in its press release of 23 June 2015, or a premium of between 2x and 3x compared to the average values for these types of assets in the European market. The Offer consists of a cash payment of €9 billion upon closing of the transaction and, at the option of Bouygues, an additional amount of either (i) a guaranteed cash payment of €1 billion three years following closing of the transaction OR (ii) a payment of €1 billion in Numericable-SFR shares subject to a three- year put/call guaranteeing a €1 billion minimum price for Bouygues plus 3 per cent IRR per year in line with a similar structure put in place between Altice and Vivendi in connection with the acquisition of SFR by Numericable, providing Bouygues with significant upside potential as a result of the realisation of expected synergies.

Altice says the Offer is fully and unconditionally financed under commitment letters from BNP, JP Morgan and Morgan Stanley. The financing of the Offer is through (i) approximately €3.5 to €4 billion of bank debt, and (ii) approximately €6 to €6.5 billion in capital comprising (x) €3.5 to €4 billion from (A) asset sales and (B) a capital increase (reserved for the Bouygues group if it opts to receive partial payment in the form of Numericable-SFR shares) and (y) approximately €2.5 billion in cash available at Numericable-SFR at the time of closing. The Offer is, therefore, funded with 60 per cent-65 per cent in equity and 35 per cent-40 per cent in debt, not 100 per cent debt as reported in the press.

Regulatory Risk

In order to ensure the success of the transaction and in order to contain regulatory risks, Numericable-SFR has entered into exclusive negotiations with Iliad to set the terms for transfers of assets. Numericable-SFR and Free have agreed that these asset transfers will be made post-closing of the Bouygues Telecom acquisition. As such, they are more robust than the agreements entered into by Bouygues in March 2014 as part of its failed takeover bid for SFR. Altice and Numericable-SFR have already initiated contacts with the relevant French regulatory authorities to address and resolve any potential issues, as has been done for all such transactions carried out in France.

Job Guarantees

Altice has committed to the Bouygues Group and to the French Government to maintain employment levels at Bouygues Telecom under conditions similar to those which had been negotiated in connection with the acquisition of SFR. To date, the Numericable-SFR Group is ahead of schedule in its synergy programme while fully meeting its commitment to maintain employment.

Continue to Invest Heavily

Altice has committed to the French Government to:

  1. continue to increase Capital Expenditures, specifically in the deployment of fibre (FTTH) with a commitment to now reach 20 million homes passed between now and 2020, an additional 5 million homes passed over what Altice committed to in 2014 – it should be noted that Capital Expenditures have increased by 20 per cent at SFR since it was taken over by Altice six months ago;
  2. fully participate in the auction on the 700 MHz frequencies

For its part, Bouyges says that at its meeting of 23 June 2015, the Board of Directors had decided “unanimously,” after an in-depth review, not to follow up on the Altice group’s “unsolicited” offer to acquire Bouygues Telecom.

The Board of Directors said it made its decision for the following reasons:

  • The Board is convinced that the telecoms market is at the dawn of a new era of growth driven by the exponential development of digital uses.

The Board believes that Bouygues Telecom is particularly well positioned to take advantage of this growth, considering that it has a strong and long-term competitive edge afforded by its portfolio of frequencies and its 4G network, which is recognised as being one of the best in the market. The operator, having become the fixed market’s mover, is also benefiting from its breakthrough in fixed broadband and the successful launch of its Bbox Miami Android TV box. Finally, the acceleration in the company’s transformation is resulting in an increasingly competitive cost structure.

  • The Board believes that Bouygues Telecom has the means to return to an EBITDA margin of at least 25 per cent by 2017 (the same level as in 2011), a margin that should continue to rise in the longer term.

In addition, the Board considers that the offer presents a significant execution risk, which should not be borne by Bouygues, particularly in terms of competition law in both the fixed and mobile markets.

Altice has not provided a fully satisfactory response regarding this important matter that would be examined closely by the Competition Authority. Furthermore, the offer does not factor in the imminent launch of the 700 MHz frequencies auction process and its consequences on the deal.

  • Finally, the Board paid great attention to the consequences of market consolidation on employment as well as the social risks inherent to such an operation. The Bouygues group has always strived to write an industrial story that creates value in the long term with its employees and suppliers, and in the interests of its customers, while respecting its commitments in terms of investment for the development of French infrastructures.

The Board renewed its full trust in Bouygues Telecom’s executive management team and employees, and paid tribute to their motivation and efforts accomplished.

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