Altice to buy Cablevision for $17.7B to expand in the U.S.
Altice Group, a European telecom company controlled by French cable entrepreneur Patrick Drahi, has agreed to buy U.S. cable operator Cablevision (CVC) in a deal valued at $17.7 billion.
Not including Cablevision's debt, Altice will pay about $10 billion in cash -- or $34.90 per share -- for the Bethpage, N.Y.-based company that is controlled by the Dolan family
The deal would create the fourth largest cable operator in the U.S. market, the companies said. The acquisition also includes Newsday Media Group, publisher of Newsday and amNewYork. The deal doesn't include the Madison Square Garden Company, which is also controlled by the Dolans and owns the New York Knicks and Rangers and their home arena in Manhattan.
Shares of Cablevision ended Wednesday down a penny to $28.54 in regular-hour trading. Shares zoomed 16% to $33.25 in pre-market.
In May, Altice, headquartered in the Netherlands, entered the U.S. by agreeing to buy cable operator Suddenlink Communications in a deal valued at $9.1 billion. Drahi, Altice's chairman, said a month later that he was not done dealing here and that he was interested in expanding the company's revenue in the world's largest TV and Internet market.
Amy Yong, an analyst at Macquarie Group, told USA TODAY earlier this month that Cablevision, which serves cable Internet and TV customers in the New York region, was widely seen as an attractive acquisition target and investors were expecting an imminent deal. "In the last (Cablevision earnings) call, a lot of people read from the body language that it's something they're looking into," she said.
Despite the industry challenges triggered by cord-cutting and the TV revolution, broadband Internet growth remains strong as more consumers access all types of content over digital platforms, Yong said Wednesday. "One of Cablevision's advantages is they serve a premium media market -- New York City. I think Altice is probably confident they could take out a lot of cost synergies, which we estimate is $350 million plus."
The acquisition of Cablevision follows other deals that further consolidated the pay-TV industry in recent months. In merging with competitors, pay-TV operators are looking get bigger and gain heightened bargaining power over broadcasters and TV networks that are demanding more money for their programming. By integrating Cablevision with Suddenlink and other possible future acquisitions, Altice stands to gain more leverage as it deals with U.S. networks for fees and digital content rights.
In June, AT&T completed its $48.5 billion acquisition of satellite TV provider DirecTV. In May, Charter Communications agreed to pay $55 billion to buy Time Warner Cable after Comcast's bid to buy TWC was rejected by federal regulators. Cable industry legend John Malone sits on Charter's board. And Malone's company, Liberty Broadband, owns about 25% of Charter.
Like other pay-TV operators, Cablevision's video business continues to lose customers as they turn to online streaming. In August, Cablevision, which has about 3.1 million total customers, said the number of its cable TV subscribers shrank by 16,000 during the second quarter. Its Internet customers rose 14,000.
Cablevision's revenue for the quarter increased 1.6% to $1.65 billion.
Altice, founded by Drahi in 2002, provides broadband Internet and pay TV to customers in France, Israel, Belgium, Luxembourg, Portugal, French West Indies/ Indian Ocean Area and, the Dominican Republic and Switzerland.
Born in Morocco, Drahi is now one of the richest people in France after amassing his wealth in the cable business initially in France and eventually in other international markets. In leading up to its splashy entry in the U.S. market, Altice spent up to $28 billion in telecom deals in 2014 alone, according to The Wall Street Journal.
Along the way, Drahi, who lives in Geneva, has developed a reputation for aggressive deal-making and running lean operations focused on cost management. "As always, his goal is to go fast,” an unnamed source close to Drahi told the Journal.
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