The continuing cable M&A soap opera took a new turn Tuesday night, as reports surfaced that European telecom company Altice was in late stage talks to acquire mid-sized operator Suddenlink Communications in a deal that values the St. Louis-based company at between $8 billion and $10 billion.
According to a report in The Wall Street Journal, which was confirmed by outside sources familiar with the talks, a deal could be announced as early as this week.
The Journal, citing unnamed sources, said that Luxembourg-based Altice has been looking for U.S.-based assets for months and recently acquired French wireless carrier SFR in a $23 billion deal. Suddenlink, which is owned by private equity fund BC Partners and Canadian pension fund CPPIB, has about 1.4 million customers in a dozen states, including Texas, West Virginia, Oklahoma, Arkansas and Louisiana.
According to sources in the financial community, BC Partners had expected to use Suddenlink and its founder, chairman and CEO Jerry Kent, a long-time cable executive, as a vehicle to roll up smaller operators in the cable industry.
The price, if accurate, would be a nice premium to BC Partners’ $6.6 billion valuation for the company in 2012.
Consolidation and the added scale it would bring has been a buzzword in the cable business for about two years, particularly after cable legend and Liberty Media chairman John Malone invested about $4 billion for a 27% stake in Charter Communications. Shortly after that investment Charter began a year-long pursuit of Time Warner Cable, which ultimately led to it being outbid by Comcast in February 2014. On April 24, after 14 months, Comcast terminated the TWC deal, after it became clear regulators would not approve the transaction.
Suddenlink could be a vehicle for Altice to expand its presence in the U.S., rolling up some of the estimated 600 independent cable operators scattered across the country.
But Suddenlink is not without its problems. The midsized operator has been a vocal critic of rising programming costs and, in October, it dropped Viacom’s cable channels, a move that initially led to a sharp rise in basic-video customer losses, which has since leveled off.
Suddenlink spokesman Pete Abel declined to comment on rumor and speculation.
Suddenlink would give the Luxembourg-based Altice a foothold in the U.S., but the Journal said the telecom giant is looking for an even bigger slice of the market and has held preliminary talks with Time Warner Cable about a possible deal.
But TWC, which recently terminated its $67 billion merger with Comcast and has been the target of Charter Communications, may be too much for Altice to swallow. With a market capitalization of about $32 billion, Altice is smaller than TWC, which has a market cap of about $45 billion.
Time Warner Cable officials could not be reached for comment.
And with about 10.8 million customers, federal regulators may be unwilling to let such a large provider of television and broadband services as TWC slip into the hands of a foreign company. Any deal would have to pass muster with the U.S. Treasury Department’s Committee on Foreign Investment in the United States, as well as the Federal Communications Commission and the Department of Justice.