Altice USA Plans Separation from European Parent

Will create Altice USA and Altice Europe; Goei to head U.S. operation

European telecom company Altice N.V., said late Monday it plans to separate its U.S. cable operation – Altice USA – from the parent company in a transaction that it says will allow each business to focus on value creation in their respective markets and ensure greater transparency for investors.

As part of the separation Altice N.V., the European parent, will become Altice Europe. The transaction is expected to close by the end of the second quarter.

Each unit will have its own management team – Altice N.V. founder Patrick Drahi will remain in control of both companies and will serve as president of the Board of Altice Europe and Chairman of the Board of Altice USA. Current Altice USA CEO Dexter Goei will remain in that role, and his current management team will remain intact.

As part of the deal, Altice will spin off its 67.2% interest in Altice USA to shareholders. The Altice USA board has also approved 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.

Altice USA went public in May and although it had a strong debut – it opened at $30 per share – recently it has declined, mainly due to leverage concerns at the parent company. Altice USA stock fell 35% in 2017, closing at $21.23 per share on Dec. 29. The stock finished down about 1% (15 cents) to $21.09 per share. on Jan. 8, but was up about 2% (41 cents) to $21.50 in aftermarket trading.

In a conference call with reporters, Goei said the separation won’t necessarily mean that Altice USA will be more aggressive on the deal front, adding that the company will continue to focus on organic growth.

“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,” Drahi said in a statement. “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.

"Altice Europe has tremendous opportunities as we deliver on our operational aspirations around much improved customer service and monetizing our premium infrastructure and content assets," Drahi continued. "Altice Europe has a unique asset base that is fully converged and fiber rich with strong number one or number two position in each market with nationwide fixed and mobile coverage. At the core of our strategy is the operational and financial turnaround in France and Portuga. In parallel, we have a clear plan to further strengthen our long-term balance sheet position as we execute our non-core asset disposals.

"Altice USA sees exciting opportunities in the U.S. market as we start 2018 with strong momentuml," he added. "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 US and affirm the efficiency targets set out at the time of the acquisitions of Suddenlink and Optimum.”

Altice said the proposed split is designed to create a simplified, independent and more focused operation. It claims some of the benefits of the split will include:

* Two long-term investment opportunities defined by different market dynamics, industrial strategies and regulatory regimes;

* Dedicated management teams with enhanced focus on execution in their respective markets, in each case led by founder and controlling shareholder Patrick Drahi;

* Simplified, more efficient and dynamic operating and financial structures with clear, distinct targets;

* Enhanced transparency into each company’s unique value drivers and elimination of intercompany relationships, and;

* Preserved balance sheet strengths of each company as both businesses benefit from long-term capital structures, no meaningful near-term debt maturities and strong liquidity.