Politicians expressed anxiety about the bid’s potential to destroy jobs, but Altice said it would maintain employment levels at Bouygues Telecom under conditions similar to those it negotiated with its previous acquisition of SFR, which is maintaining jobs.
It also said capex will increase, specifically on FTTH deployment, which will pass 20 million by 2020, an additional five million homes over a 2014 commitment. The company stated capex at SFR has increased by 20 per cent since its takeover six months ago.
And Altice is also fully committed to the forthcoming auction of 700MHz auctions in France. Uncertainty over participation was voiced by both Bouygues and the government.
The target company is also uncomfortable about regulatory risk, but Altice said asset transfers have been agreed with rival Iliad/Free, post-closing. It argued the agreements are more robust than those made by Bouygues last year when it tried, and failed, to buy SFR.
Boosting Free’s credentials as a competitor will likely be important to convincing regulators.
And Altice is already in talks with regulators to try and resolve any potential issues about the deal, it said.
On employment, Altice said previous acquisition SFR was ahead of schedule with its synergies while meeting commitments on maintaining jobs.
The bidder also gave more detail about its offer, which is worth “a minimum of €10 billion”. 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 guaranteed cash payment of €1 billion three years following closing of the transaction, or a payment of €1 billion in SFR-Numericable shares.
The shares would be subject to a three year put/call guaranteeing a €1 billion minimum price for Bouygues plus three 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. The idea is to provide Bouygues with the opportunity for significant upside as a result of future synergies.
The Altice offer is backed by BNP, JP Morgan and Morgan Stanley. It is financed through approximately €3.5 to €4 billion of bank debt, and about €6 billion to €6.5 billion in capital. The latter figure comprises €3.5 billion to €4 billion of asset sales (presumably including the Free deal) and a capital increase (reserved for the Bouygues group if it opts to receive partial payment in the form of SFR-Numericable shares), as well as approximately €2.5 billion in cash available at Numericable-SFR at the time of closing.
Altice was eager to point out its offer is funded with 60 per cent to 65 per cent in equity and 35 per cent to 40 per cent in debt, and not 100 per cent debt-based as per media reports.