Altice share price up, expands US foothold with $17.7-billion Cablevision acquisition

European telecoms group Altice continues working its way into the lucrative US cable market as the company run by billionaire investor Patrick Drahi announced on Thursday it has agreed to purchase Cablevision Systems Corp in a $17.7-billion deal including debt.

Altice said it would pay $34.90 per Cablevision share in cash, a 22% premium over Wednesdays closing price, valuing the cable operator at $9.6 billion. The Amsterdam-based company said it intends to finance the transaction by raising roughly $7 billion of new debt at Cablevision, as well as $3.3 billion in cash which will come from an Altice equity raising.

The cable television group also said that private equity group BC Partners and CPP Investment Board — a fund manager that invests the assets of the Canada Pension Plan, will have an option to buy up to 30% of of Cablevision’s equity to help pay out the deal.

Cablevision serves 3.1 million customers across its TV, voice and high-speed data services in the the New York, Connecticut and New Jersey area. It generated net income of $311 million in 2014 on the back of $6.5 billion in revenue.

Amsterdam-based Altice said it would issue Class A shares as part of the financing, which have fewer voting rights compared to the Class B shares owned largely by Mr. Drahi. The dual-class structure was created in June to allow the funding of more takeovers with equity without diluting his voting power.

Mr. Drahi has expanded his telecoms and cable empire spanning from France to Israel in recent years via debt-fueled acquisitions. After completing a series of deals in Europe, Altice entered the US market in May by buying 70% of the seventh-biggest cable operator Suddenlink from BC Partners and CPP Investment Board for $9.1 billion including debt.

In Europe, Altice has managed to cut costs by bundling TV, high-speed Internet and fixed- and mobile-phone services, the so-called quadruple-play model, which still doesnt exist in large scale in the US. Mr. Drahi said his vision is to do the same in the US, but bigger.

The Franco-Israeli billionaire began talks in June with Charles Dolan, the patriarch of the billionaire family which also controls the AMC cable network and the Madison Square Garden arena in New York, and managed to convince him to part with the cable operator, an asset the family had long resisted to sell. Mr. Drahis cost-cutting efforts are expected to generate $900 million in savings per year at Cablevision in the face of tough and fast-changing competition as M&A activity continues to pick up in the sector.

Altice said that JPMorgan, BNP Paribas and Barclays have committed to finance the deal and also advised it on the transaction.

Cablevision Systems Corp settled unchanged on Wednesday at $28.54 per share but was up 16.33% at $33.20 in pre-market trading on Thursday.

Altice NV was up 1.83% at €24.78 per share at 09:38 GMT in Amsterdam, trimming its year-on-year drop to 44.50%. The company is valued at €24.60 billion. According to the Financial Times, the 13 analysts offering 12-month price targets for Altice NV have a median target of €28.75, with a high estimate of €48.67 and a low estimate of €23.00. The median estimate represents an 18.14% increase from the previous close of €24.34.