Altice shares soar, acquires Suddenlink to enter US cable market

French telecommunications group Altice SA announced on Wednesday it has agreed to purchase a controlling stake in US cable company Suddenlink Communications, giving it a foothold in one of the worlds largest and fastest-growing communications markets.

Altice said it will acquire 70% of the share capital in Suddenlink from its shareholders BC Partners, CPP Investment Board and Suddenlink management, with BC
Partners and CPP Investment Board retaining a 30% stake in the company.

The deal, expected to be finalized in the fourth quarter of 2015 once regulators give the green light, values Suddenlink at 7.6 times EBITDA adjusted for synergies and gives it an enterprise value of $9.1 billion. The French company will finance the transaction with $6.7 billion of new and existing debt at Suddenlink, a $500 million vendor loan note from BC Partners and CPP Investment Board, and $1.2 billion of cash.

“We are very excited about the acquisition of Suddenlink and are highly committed to continue to improve network investment, customer offers and service innovation in the attractive US market,” said Altice CEO Dexter Goei. “Our investment in Suddenlink, our first in the cable sector in the US, opens an attractive industrial and strategic avenue for Altice in the US, one of the largest and fastest growing communications markets in the world.”

Suddenlink is the seventh-largest US cable operator with 1.5 million residential and 90 000 business customers, Altice said in its statement. In 2014, it generated $2.3 billion in revenue and $900 million in earnings before interest, tax, depreciation and amortization (EBITDA), with operations primarily focused in Texas, Oklahoma, Arkansas, Louisiana, North Carolina and West Virginia.

The telecoms group has been in an acquisition spree since Patrick Drahi, Altices Executive Chairman and founder of Numericable, took it public in January 2014, having acquired Frances second-largest mobile carrier SFR, as well as Portugal Telecom. Altice has also held talks to buy Time Warner Cable, which would give it access to large US markets like New York and Los Angeles, but such a deal would see rival competition.

“With a well invested, leading broadband network across its footprint, Suddenlink has a strong operational and financial growth track record,” the French company said. “Suddenlink’s focus on service, innovation and investments provide a strong basis for extending its market leadership and growth momentum.”

Altice SA traded 7.70% higher at €124.50 per share at 09:16 GMT in Amsterdam, marking a one-year jump of 159.38%. The company is valued at €28.66 billion. According to the Financial Times, the 9 analysts offering 12-month price targets for Altice SA have a median target of €96.00, with a high estimate of €140.00 and a low estimate of €88.00. The median estimate represents a -16.96 % decrease from the previous close of €115.60.