Altice Europe: private line


For all the hand-wringing about the shrinking of public equity markets, there is evidence that private investors pay more for the same assets. That forms the basis for the €2.5bn valued minority buyout at Altice Europe by its owner Patrick Drahi announced on Friday. His proposed bid price of €4.11 lifted the Dutch-listed share price by a quarter on the day. Even so, this bid looks opportunistic.

Here is why. Before today, the shares had more than halved from February’s peak. The cash bid, a 23.8 per cent premium to the previous day’s close, comes from Next Private, Mr Drahi’s holding vehicle. It will be hard to contest. And the owner of Sotheby’s will not want any auctions. He controls well over three-quarters of the shares and the board has recommended the offer to minority shareholders. That does not make it an attractive offer, though. It is a long way from the estimated fair value of €5.7 per share by Russell Waller at telecom specialists New Street Research.

Mr Drahi can be said to have made a decent effort to raise the value of Altice Europe. He cut costs — a must when net debt exceeds forward ebitda by more than six times. He sold off stakes in both the Portuguese and French fibre units to hint at the latent value hidden within the larger group.

Even so, its enterprise valuation as a multiple of ebitda, at 6 times before this bid, trailed by over a quarter those of both its local rival Iliad as well as that of Spanish peer MasMovil. The latter was bought by private equity in early June. Meanwhile, telecom towers group Cellnex, also Spanish, trades over four times higher on the same valuation ratio.

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As a result Mr Drahi’s model of bringing private equity techniques to public markets did not deliver his hoped-for returns. Public market investor stinginess, in telecoms at least, should mean more buyouts follow.

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