Altice spinning off U.S. operation

Jan. 9, 2018
Altice NV's (Euronext:ATC) board of directors has approved plans for the separation of Altice USA (NYSE:ATUS) from Altice NV,which will be ...

Altice NV's (Euronext:ATC) board of directors has approved plans for the separation of Altice USA (NYSE:ATUS) from Altice NV,which will be renamed "Altice Europe". The separation is intended to enable each business to focus more on the distinct opportunities in their respective markets and ensure greater transparency for investors. Altice NV aims to complete the proposed transaction by the end of the second quarter 2018 following regulatory and Altice NV shareholder approvals.

The separation is to be effected by a spin-off of Altice NV's 67.2% interest in Altice USA through a distribution in kind to Altice NV shareholders. Following that proposed transaction, the two companies will be led by separate management teams. Patrick Drahi, founder of Altice, will retain control of both companies through Next2 and is committed to long-term ownership. Post-separation, Drahi will serve as president of the board of Altice Europe and chairman of the board of Altice USA.

Simultaneously, the board of directors of Altice USA, acting through its independent directors, today approved in principle the payment of a $1.5 billion cash dividend to all shareholders immediately prior to completion of the separation. Formal approval of the dividend and setting of a record date are expected to occur in the second quarter of 2018. The payment of the dividend will be funded with available Optimum revolving facility capacity and a new financing at Optimum. Altice NV will use €625 million of its c.€900 million of proceeds received in the Altice USA dividend to prepay a portion of the Altice Corporate Financing facility and will retain c.€275 million on balance sheet. In addition, the board of directors of Altice USA has authorized a share repurchase program of $2 billon, effective following completion of the separation.

In the spirit of enhanced accountability and transparency, Altice Europe will reorganize its structure comprising Altice France (including French Overseas Territories), Altice International and a newly formed Altice Pay TV subsidiary. This will include integrating Altice's support services businesses into their respective markets and bundling Altice Europe's premium content activities into one separately funded operating unit with its own P&L. Altice NV's ownership of Altice Technical Services US will be transferred to Altice USA prior to completion of the separation for a nominal consideration.

Altice founder Patrick Drahi said: "The separation will allow both Altice Europe and Altice USA to focus on their respective operations and execute against their strategies, deliver value for shareholders, and realize their full potential. Both operations will have the fundamental Altice Model at their heart through my close personal involvement as well as that of the historic founding team."

Regarding the U.S. operation, Drahi said: "Altice USA sees exciting opportunities in the U.S. market as we start 2018 with strong momentum. We have a full operational agenda to deliver best-in-class services to our customers, drive innovation and advance our fiber investment strategy. The new organization structure will enable us to focus even more on executing this agenda while enhancing transparency for our investors. We remain confident in achieving the objectives we set out at the beginning of our journey in the U.S. and affirm the efficiency targets set out at the time of the acquisitions of Suddenlink and Optimum."

Altice Europe and Altice USA will be managed by two distinct management teams, focused solely on the performance in their respective markets. Armando Pereira will serve as COO of Altice Europe and serve as strategic advisor to Altice USA for all operations. Dexter Goei will continue to serve as CEO and a director of Altice USA. He will report to Drahi.

Altice USA's business strategy continues to focus on Altice's original investment thesis when it entered the U.S. market in 2015, which the U.S. team has been successfully implementing since then. Central to Altice USA are investments in networks and the video product, simplification across the operations, and improved customer service. Altice USA will focus on the following key areas to successfully complete the original acquisition plan and be prepared for the next phase of market consolidation:

  • Focus on KPIs to improve revenue growth
  • Complete implementation of opex efficiencies
  • Full scale deployment of Altice One and fiber (FTTH) buildout

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