Leila Abboud is a former Bloomberg Gadfly columnist.

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.

Telecoms billionaire Patrick Drahi has given French market regulators and investors a lesson in unintended consequences.

After the AMF last week vetoed an exchange offer by Drahi’s Altice to buy the 22 percent of SFR it didn't already own, the tycoon went out and arranged to buy 5.2 percent from unnamed shareholders in a private transaction. Announced Friday, the deal was done at the same exchange ratio as the aborted public offer –- 1.6 Altice shares for each SFR share -- despite the fact that the French telco's shares have fallen 12 percent, while those of Altice have been flat, since the AMF's Oct. 4 decision.

Crossed Lines
SFR shares fell after French regulators objected to Altice offer
Source: Bloomberg

Oh, the irony. The AMF wanted to ensure fair treatment of SFR’s independent shareholders. But SFR minorities hoping Drahi would raise the price of his public offer have lost out, while a small group of investors has got an exit on the original offer terms in a private transaction not open to everyone.

The AMF action helped make this happen. Its declaration that the Altice offer didn't satisfy its rules led to SFR shares tumbling and doubtless created some very willing sellers. Prior to the AMF intervening on Oct. 4, SFR was trading at a premium to Altice's bid, putting the offer at risk of failing altogether. Since then, SFR stock has been trading at a level equivalent to just 1.4 Altice shares.

Altice has been weighing whether it wants to sue the AMF for blocking its original bid. Yet private placements may be a way round the AMF anyway. These may have to be staggered at time intervals, but they still offer a path to Drahi mopping up more shares without the rigmarole of a formal tender offer. Altice now owns 83 percent of SFR. That said, it would be brave to bet on Drahi staging a repeat any time soon.

Assuming the latest transaction hasn’t fallen foul of market regulations in some way, Drahi seems to have run rings round the AMF. But the minorities that remain on the SFR register will be even more angry at the position in which they find themselves -– with less influence, less liquidity, and no offer.

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

To contact the authors of this story:
Leila Abboud in Paris at labboud@bloomberg.net
Chris Hughes in London at chughes89@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net