European telecom giant Altice gained a foothold in the U.S. telecom market Wednesday, agreeing to acquire a 70% interest in Suddenlink Communications for $9.1 billion.
Altice will purchase the stake from Suddenlink’s owners – private equity firm BC Partners, Canadian pension fund CPPIB and Suddenlink management.
News of the deal was first reported by the Wall Street Journal.
Altice, which has reportedly been on the hunt for U.S. assets for months, will apparently use Suddenlink as a vehicle to roll up other operators.
“We are very excited about the acquisition of Suddenlink and are highly committed to continue to improve network investment, customer offers and service innovation in the attractive US market,” Altice CEO Dexter Goei said in a statement. “Our investment in Suddenlink, our first in the cable sector in the US, opens an attractive industrial and strategic avenue for Altice in the US, one of the largest and fastest growing communications markets in the world. We are looking forward to our partnership with BC Partners and CPP Investment Board and believe Suddenlink is a best-in-class business that should be able to deliver profitability and cash flow levels in line with best-in-class European cable businesses."
According to the deal, BC Partners and CPPIB will retain a 30% interest in Suddenlink. The two first invested in the St. Louis-based operator in 2012, valuing it at about $6.6 billion.
The deal values Suddenlink at about 7.6 times cash flow and will be financed through $6.7 billion of new and existing debt at Suddenlink, a $500 million note from BC Partners and CPPIB and $1.2 billion in cash. The deal is expected to close by the fourth quarter.
Suddenlink has about 1.5 million customers in about a dozen states, including Texas, Louisiana, Arkansas, West Virginia, Oklahoma and Arizona.
The transaction also appears to mark the departure of Kent, who founded investment company Cequel III (which formed Suddenlink) in 2002 after leaving Charter Communications in 2001 after a dispute with then-owner Paul Allen. Ironically, Goei was a member of the new board slate that Charter had proposed for Time Warner Cable in 2014 when it was still pursuing that company. While that deal never came to be, reports said that Altice has approached Time Warner Cable about a possible deal.
"I'm very proud of the Suddenlink team and our accomplishments over the last 12 years,” Suddenlink chairman and CEO Jerry Kent said in a statement. “This acquisition is a testament to the consistently strong operating and financial results we've achieved. While our strong performance has afforded Suddenlink ready access to growth capital, the backing of Altice will better position the company to gain critical scale as a major consolidator in the U.S. cable industry.”
"For my part, after the acquisition is completed, I'll continue to focus on other businesses, through my investment and management company, Cequel III,” Kent continued. “Throughout my entrepreneurial career, I've been excited and energized by seeking new opportunities and companies, and I look forward to the next chapter."
JP Morgan, PJT Partners and BNP Paribas acted as financial advisors to Altice. Franklin, Covington, Mayer Brown and Ropes & Gray acted as legal advisors to Altice.