ANALYSIS: Altice deal to pave way for further high-yield deals in 2015
In its third major acquisition over the past year, Altice bought Oi’s Portuguese assets in January 2015.
And it’s unlikely to be its last purchase in the telecoms space, a financial advisor to the deal told Capacity.
Altice acquired the Portuguese assets from Oi for €7.4 billion in January, after several weeks of uncertainty from shareholders who initially claimed they did not have enough information on the deal to make an educated decision.
Altice also acquired France’s SFR from Vivendi for €17 billion in April 2014, and later in November, its subsidiary Numericable acquired Virgin Mobile France.
The Portuguese deal marks a movement towards Altice’s broader strategy of European consolidation.
“Altice is going to focus on in-market consolidation going forward - it’s part of their strategy,” said Michael Kazakevich, high yield partner at Ropes & Gray.
“I don’t know of any specific deals going on right now, but they are looking at various opportunities in the market and we expect to be busy going forward,” he added.
Ropes & Gray represents both Liberty Global and Altice in the European market, incorporating Virgin Media, Ziggo, UPC and Unitymedia from the former, and Altice’s Dominican, Portuguese, Israeli and French business units.
He explained that Altice generally targets companies which are “very far ahead of the curve on their networks and their 3G/4G capability”, meaning it is then tasked with keeping up investments in order to stay ahead of competition.
Furthermore, the Altice transaction is one of several high-yield deals in the telecoms space. Kazakevich said that the high-yield market has always been “very friendly to the telecoms sector”.
“You have predictable cash flows and you have stable businesses, which is easy for the high-yield market to understand because they can clearly forecast these cash flows and understand the credit risk,”said Kazakevich.
“[The high-yield market] has always been willing to finance telecoms acquisitions and finance their growth.”
Kazakevich said that high-yield issuers such as Virgin, Altice and Ziggo are now leading the way in demonstrating the continued demand for high-yield.
“We expect the rest of the market to now come to life because they are realising that it is safe to go back in the water,” Kazakevich said.