Bouygues Boosts SFR Bid to Take Cash Portion to $21 Billion

Bouygues SA, locked in a monthlong bidding war with Altice SA to acquire Vivendi SA’s French telecommunications unit SFR, sweetened its offer again to bring the cash component to 15 billion euros ($20.6 billion).

The construction and media company led by Martin Bouygues put up an extra 1.85 billion euros, topping a cash bid from cable tycoon Patrick Drahi’s Altice by 3.25 billion euros. Vivendi would receive 10 percent of a company created from a merger of SFR with Bouygues Telecom, Paris-based Bouygues said. Altice, proposing to combine its Numericable Group with SFR, offered Vivendi a 32 percent stake in an enlarged entity.

With the backing of a French state-controlled fund, Bouygues is putting pressure on Vivendi’s supervisory board, which is meeting today to decide whether to seal an agreement with Altice, its preferred bidder for the country’s second-largest phone company. Altice and Vivendi have been in exclusive talks for three weeks.

“This morning it seemed very much a done deal,” said Ian Whittaker, an analyst at Liberum Capital Ltd. in London. “I don’t think that’s the case now. The extra cash has definitely changed the dynamics.”

Bouygues said its latest offer, excluding potential cost savings and additional revenue, is valued at 16 billion euros, which could rise to as much as 16.5 billion euros including a so-called “earn-out clause.”

Reopening Process?

Numericable fell 2.4 percent to 27.24 euros at 1:31 p.m. in Paris and Bouygues slid 0.8 percent, while Vivendi added 0.1 percent. Altice dropped 4.3 percent in Amsterdam.

Representatives for Paris-based Vivendi and Luxembourg-based Altice didn’t immediately return phone calls seeking comment.

Vivendi could choose to reach a final agreement with Altice today, extend the exclusivity period with Drahi’s company, decide to proceed with talks with Bouygues or reopen the bidding process, people familiar with the matter have said, asking not to be named because the deliberations are private.

Drahi, the 50-year-old Altice chairman who made his fortune amassing cable assets, has tried for years to take over SFR. His most recent proposal values the combined entity at 20 billion euros including debt, according to Altice.

Vivendi Split

The separation of SFR started last year as a spinoff plan, part of Chairman Jean-Rene Fourtou’s promise to split Vivendi into two companies focused on telecommunications and media, respectively. Vivendi also owns Universal Music Group, pay-TV company Canal+ and Brazilian broadband provider GVT.

If a sale of SFR is completed, it could surpass Actavis Inc.’s agreement to buy Forest Laboratories Inc. by value, making it the second-biggest acquisition globally announced this year, according to data compiled by Bloomberg. Comcast Corp.’s bid for Time Warner Cable Inc. is the largest. An acquisition could also provide one of the biggest financing deals to loan bankers in Europe this year.

The fight for SFR, whose previous owners included Vodafone Group Plc, represents a milestone in European carriers’ push to merge in response to stricter regulations and increased competition. The European parliament yesterday voted in favor of plans to eliminate mobile roaming fees within the European Union. Still, French prices have fallen by more than 30 percent since Iliad SA became the fourth carrier in 2012.

Antitrust Risks

An SFR-Bouygues Telecom merger is more likely to attract antitrust scrutiny than SFR-Numericable combination because it would reduce the number of mobile network operators in France from four to three. Bouygues had reached a preliminary deal to let Iliad, founded by entrepreneur billionaire Xavier Niel, take on some assets should Bouygues’s bid succeed.

Vivendi is evaluating cash proceeds as well as criteria including regulatory risks, implications for SFR’s about 9,000 jobs, and the liquidity of the stake in the enlarged SFR it will retain, people familiar with the matter have said.

Bouygues said today other investors backing its offer include Singapore’s sovereign-wealth fund GIC Pte, Axa SA, Ontario Teachers’ Pension Plan Board, the Dassault family and Reuben Brothers Ltd. Investors announced earlier included Caisse des Depots et Consignations, JC Decaux Holding and the Pinault family.

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