Bouygues SA (EN) sweetened its offer for Vivendi SA’s SFR unit with the financial backing of the French government in an attempt to derail a bid from cable tycoon Patrick Drahi and his Numericable Group.
The revised proposal includes 13.15 billion euros ($18.1 billion) in cash -- an increase of 1.85 billion euros -- and a 21.5 percent stake in the entity created from a merger of SFR with Bouygues Telecom. The new offer values SFR at 17.4 billion euros including potential cost savings and additional revenue, Paris-based Bouygues said yesterday.
The latest turn in the takeover battle leaves open the question of who will end up owning France’s second-largest phone company. Vivendi last week defied opposition from politicians including Industry Minister Arnaud Montebourg, choosing to hold talks with Numericable parent Altice SA. (ATC) Drahi’s company offered 11.75 billion euros in cash and a 32 percent stake.
“Vivendi’s board will have to at least take a look at the new Bouygues offer,” said Claudio Aspesi, an analyst at Sanford C. Bernstein. “Still, Vivendi chose Numericable for various reasons, not just price -- it’s hard to predict how much influence this will have on its final decision.”
Bouygues shares rose 0.8 percent to 30.90 euros in Paris at 9:06 a.m., while Iliad SA, which had agreed to take on some assets if Bouygues’s bid succeeds, rose 2.3 percent. Vivendi (VIV) rose 0.5 percent, Numericable fell 2.7 percent, and Altice dropped 2.1 percent.
Bouygues’s revised bid -- the second this month -- is backed by state-controlled Caisse des Depots et Consignations, as well as the Pinault family, which controls luxury group Kering, and JCDecaux Holding.
The CDC will invest 300 million euros in cash and would hold a stake of about 3 percent of the combined entity, an official for the government-controlled fund said by telephone. The Paris-based construction-to-media conglomerate led by Martin Bouygues would own 67 percent.
“An IPO of the new entity is planned as soon as the merger is completed, thus giving Vivendi an immediate opportunity to monetize the remainder of its interest,” Bouygues said yesterday. Bouygues will also seek to bring in other investors to give Vivendi further options for an exit.
Vivendi is attempting to re-focus on content and media assets as sales slow and prices decline in France’s telecommunications market, one of Europe’s most competitive.
Among other criteria in play are Vivendi’s possibilities for exit, regulatory risks and how the French wireless market would evolve should Bouygues catch up to leader Orange (ORA) SA by buying SFR, Aspesi said.
Vivendi said in a release it had received the new offer and that “it should be kept in mind” that its board decided on March 14 to begin exclusive negotiations with Altice for three weeks. A Paris-based representative for Altice said the company has been working closely with Vivendi’s teams since the announcement.
Choosing either bid will mean Vivendi scrapping its initial plan to spin off SFR and distribute its stock to shareholders.
Backing for the Bouygues bid shows the government supporting a reduction in the number of France’s wireless carriers to three from four.
Since Iliad (ILD) became the country’s fourth network operator in 2012 by selling discounted packages, operators have been battling with falling phone bills and intensifying price wars.
Montebourg, the industry minister, in the past weeks has said he favors Bouygues’s offer. Although the minister’s position doesn’t necessarily represent the rest of the government, the rationale behind his support is shared by Hollande’s entourage, a top government official has said, asking not to be named citing state policy.
France’s Competition Authority may have a tougher stance on consolidation. A combination of SFR and Bouygues would create a carrier with more than 21 million wireless subscribers, about as big as Orange.
It may take the watchdog nine months to fully examine the sale of SFR, President Bruno Lasserre has said.