Vivendi SA’s share price up, agrees to sell its SFR telecom unit to Altice SA for 23 billion dollars

Vivendi SA announced its decision to sell its SFR telecom division to Altice SA in a deal estimated to more than 17 billion euros (23 billion dollars). The price of the deal amounts to 13.5 billion euros in cash and a 20% stake in the new entity that is to be formed after the merger between SFR and Altice Numericable Group is complete.

The offer of Altice and Mr. Drahi was unanimously approved by the board of directors of Vivendi SA on Saturday.

Vivendi SA made a statement, which was cited by Bloomberg: “After thorough discussions, the supervisory board decided unanimously to select the Altice/Numericable offer which corresponds to the industrial project offering the highest growth potential, generating the highest value for its customers, employees and shareholders, while best meeting Vivendi’s objectives.”

Altice explained that its Numericable Group will release a rights issue, which amounts to 4.7 billion euros in order to help the financing of the future merger. The other 8.8 billion euros of the agreements cash portion will be backed by debt financing with a union of banks. As reported by Bloomberg, the companys Chairman Mr. Drahi explained in a statement that Altice has taken on “formal engagements to guarantee employment in the framework of this merger.” He also added: “This project will generate strong growth, which will create jobs and investment.”

The outcome of the long process of negotiations is considered a personal victory for Altice SAs Chairman Mr. Patrich Drahi. However, some analysts believe that this success does not apply to the telecoms sector in France, which is hardly competitive and will start a new battle for survival. In addition, the deal needs to be approved by countrys regulators.

The decision of Vivendi, which preferred the offer of Drahi puts an end to the bidding war between Bouygues and Altice. Both analysts and regulators in France were concerned due to the fact that an eventual agreement with Bouygues would have reduced the number of mobile operators in the country from four to three, which would definitely influence competition between them.

However, the Chief Executive Officer of Orange SA – Mr. Stephane Richard shared his opinion for the Wall Street Journal: “This isnt the end of the story. A passage from four to three players is inevitable.”

According to the Financial Times, shares of Vivendi SA traded up 0.95% and companys one-year return rate is 28.88% up. The 20 analysts offering 12-month price targets for Vivendi SA have a median target of 22.00, with a high estimate of 27.00 and a low estimate of 15.00. The median estimate represents a 7.03% increase from the last price of 20.56.