Cable Consolidation May Have To Wait

Charter, Altice Chiefs Say Prices High, M&A Opportunities Scarce
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The once inevitable cable distribution consolidation wave may have to wait a bit, according to two of the most aggressive participants in the M&A space. On Friday, Charter Communications chairman Eric Zinterhofer (pictured) and Altice CEO Dexter Goei, told an audience at the CTAM Europe Conference in Amsterdam that after a flurry of deals, cheaper assets are getting harder to find.

According to Bloomberg News, Zinterhofer told the audience at the CTAM conference that Charter, which agreed to purchase Time Warner Cable in a deal valued at $78.7 billion in May,  won’t pay high multiples of cash flow, which he characterized as between 9 and 11 times, for other assets. Zinterhofer continued that the multiples are expected to go down eventually, “but we can’t help but notice interest rates will have to rise, China’s causing wobbles and commodity prices are affecting some markets.”

At Altice, which had tried to purchase TWC before being outbid by Charter, later agreed to buy a 70% stake in Suddenlink Communications for $9.1 billion. On announcing that deal, CEO Dexter Goei said the intention was to use Suddenlink as a vehicle to acquire more cable assets in the U.S. Altice, based in Luxembourg, is one of the most aggressive players in the telecom space. Shortly after the Suddenlink deal was announced, Goei told several European papers that he was interested in acquiring Dutch telecom giant Royal KPN.

At the CTAM conference, Goei apparently changed his tune. According to Bloomberg, Goei said that here are no obvious M&A targets for Altice, including KPN.

“There’s a scarcity of assets that are cheap, but if a stock is too expensive today, maybe we’ll look again in two years when China blows up or something else happens,” Goei said according to Bloomberg. “We’re always opportunistic.”

Both Charter and Altice were expected to compete for cable assets after their pending deals are closed. Charter is hoping to receive regulatory approval on the TWC deal by the end of the year – a date Zinterhofer reiterated at the CTAM conference – but some analysts believe it may take until March to close the deal.

Altice also was expected to be an aggressive acquirer of systems, and chairman Patrick Drahi specifically named Cablevision and Cox Communications as possible targets. Cox has said publicly that it is not for sale, but given the past rise in its stock, the market seems to believe that a Cablevision deal could be a possibility down the road, especially since CEO James Dolan said back in May that his service territory should be consolidated.

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