Chris Hughes is a Bloomberg Gadfly columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.

Leila Abboud is a former Bloomberg Gadfly columnist.

Patrick Drahi is back to square one. The billionaire's attempt to take full control of French telecoms group SFR has been stopped in its tracks by Paris's market regulator.

That's embarrassing -- but Drahi might yet be able to turn the situation to his advantage.

Altice, which Drahi controls, last month made an all-stock offer for the 22 percent of SFR it doesn't already own. The company would get all of SFR's cash flows and tidy up its structure.

The effort had already been foundering before the Autorité des Marchés Financiers's announced late Tuesday that the offer broke its rules, prompting Altice to withdraw.

Before that, SFR shares had been consistently trading at a higher price than the value of Drahi's bid. Altice's offer of 1.6 of its own shares for each SFR share was worth 25.97 euros just before the AMF intervened. SFR's shares had been trading at 26.52 euros.

Gimme More
SFR shares jumped on Altice's lowball Sept. 5 offer, and stayed higher as investors hoped for a raised bid
Source: Bloomberg

It's not clear what the AMF didn't like -- a full judgment will come late Wednesday. The regulator had received a complaint from at least one investor that the valuation was unfair and the SFR board wasn't effective. Whatever the reason, this is a very unusual situation and Altice could appeal or take legal action to try to reverse it. The AMF will need to be very clear in its reasoning to avoid looking capricious.

Amid the uncertainty, it is hard to know whether the AMF's objections are going to be surmountable. If they are, Drahi could come back with a new bid and his hand won't have been weakened by this episode.

First, SFR shares have dropped 5 percent to 25.18 euros. That indicates their buoyant performance was simply based on hopes Drahi would up his offer, and not because investors had suddenly reappraised SFR's fundamental value.

What's more, the ratio between the two stocks is now slightly more favorable to Altice, judging by Wednesday morning's trading. SFR shares now trade for the same price as 1.54 to 1.55 of their Altice equivalents. That ratio was 1.56 before Drahi made the bid on Sept. 5. That decline, perhaps, reflects concerns that Altice will never come back.

For now, the betting must be that Drahi will do what it takes to make a renewed offer one day. The question is when that will be. The risk is that by the time he's able to return, the relative strength of the Altice and SFR shares has reversed: SFR is midway through a turnaround program which may kick in over the coming year. 

Drahi had better hope he can come back sooner rather than later.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
Chris Hughes in London at
Leila Abboud in Paris at

To contact the editor responsible for this story:
Edward Evans at